FM directs banks to increase credit flow to MSMEs, others

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SME Times News Bureau | 21 Nov, 2014
To boost growth, Finance Minister Arun Jaitley Thursday asked public sector banks to ensure smooth access to credit to various key sectors to facilitate rapid growth in economic activity, which was a key priority of the Government.

"Take steps to increase the credit flow to various sectors of the economy since credit is lifeline of an economy. Key sectors like Agriculture, micro, small and medium enterprises (MSMEs), Housing and Education required particular focus," Jaitley told banks during quarterly review meeting of PSBs and other FIs by the finance ministry in the national capital on Thursday.

Banks were urged to achieve the ambitious credit flow growth target for the Micro and Small Enterprises (MSE) sector in particular, given the implication for job creation and growth in manufacturing output implicit in it.

The Finance Minister further said that global growth is quite patchy and direction of global investment is still unclear.

He said that there is great opportunity for India to attract foreign investment and large numbers of international entrepreneurs are showing their keen interest in India.

Jaitley said that their capital is comparatively less costly than ours and once it starts flowing than it will definitely impact us positively.

He further asked the bankers to take necessary corrective measures in order to bring down their Non Performing Assets (NPAs). FM asked them to honestly analyse the reasons for the same and take necessary corrective measures accordingly.

Towards this end, a clear message was conveyed that Banks should carry out lending on the basis of objective due diligence without being unduly conservative, in a completely transparent manner without fear or favour. This would boost the economy and enable an asset book of high quality.

The ratio of gross NPAs to gross advances had gone up to 5.32 percent at the end of September over 4.82 percent in the same period of the last fiscal.

Meanwhile, the government must pump in Rs.240,000 crore over the next five years into state-run banks to ensure their health, even as stake sale remains an option, a top central bank official said Wednesday.

"With the emphasis on fiscal consolidation by the government of India, the leeway earlier available to the public sector banks to approach the government for additional capital will be limited," Reserve Bank of India Deputy Governor S.S. Mundra said at an investors' conference in Mumbai.

"Hence, one of the options for the government could be to reduce its stake in some of the public sector banks which presently ranges from 56.26 percent to 88.63 percent," he said.