The financial stimulus announced by the finance minister Nirmala Sitharaman in two tranches is largely an allocation of bank credits to the deprived businesses, which may lead to the rise of non-performing assets (NPAs) on the books of public sector banks, said leaders of bank employees associations. Besides, its implementation process will increase the stress on employees, they said.
The finance minister on Wednesday spoke about extending Rs 3 lakh crore loans to stressed MSMEs. On Thursday, she announced Rs 2 lakh crore concessional credit facilities to the farmers, fishermen and animal husbandry workers. She also announced about the credit facility of Rs 5,000 crore for 50 lakh vendors.
"The government expects the banks to lend Rs 3 lakh crore to the stressed MSMEs for helping them in coming out of the financial troubles. But where is the infrastructure to lend? The stressed MSMEs have not been working for the last two months and have not been generating any cash flow. How can a bank manager take the decision to lend to these kinds of firms? The manager who sanctions the loans will have to face harassment if the loans turn NPAs," said CH Venkatachalam, General Secretary, All India Bank Employees Association (AIBEA).
CJ Nandakumar, President, Bank Employees Federation of India (BEFI) said that the government has been trying to revive the economy through different measures since February. "Most of the steps they took through Reserve Bank of India (RBI) have failed to achieve the desired results. Now it's clear that the government lacks the idea. It has shortage of capital to do a full-fledged stimulus," he said.
The finance minister also spoke about lending to the loan defaulters, said Venkatachalam. "How can they pay back? The stimulus announced so far will expand the irrecoverable liabilities on the books of banks and add mental stress to the employees and officers," he added.
The government in February said the NPAs of public sector banks (PSBs) stood at Rs 7.27 lakh crore as on September 30, 2019. The gross NPAs of PSBs, as per RBI data on global operations, rose from Rs 2,79,016 crore as on March 31, 2015, to Rs 6,84,732 crore as on March 31, 2017 and Rs 8,95,601 crore as on March 31, 2018.
Venkatachalam said that the government is depending heavily on the public sector banks to come out of the economic stress triggered by the coronavirus pandemic and the resultant lockdown. "The fresh loans to stressed firms and businesses are a kind of donation. If many of these firms fail to repay the loans, the NPA on the books of banks will increase," he added.
The MSMEs are in trouble since the demonetisation and their problems aggravated with the faulty implementation of GST. The Rs 3 lakh crore credit facility announced for just 45 lakh firms. But there are about 6 crore MSMEs in the country. The loan facility offered to MSME will only benefit the subsidiaries of multi-national companies, said Nandakumar.
The government should support the banks in the recovery of bad loans, when they force for enhancing the lending, added Venkatachalam. The bad loans are bulging and have reached Rs 10 lakh crore.