Finance Minister Nirmala Sitharaman has announced a slew of measures to nurse the ailing Indian economy to health, including an immediate release of Rs 70,000 crore to public sector banks. She also said that banks have agreed to pass on the benefits of repo rate cut to its customers and that EMI for various loans will be reduced by linking repo rates to interest rates.
These announcements come as Moody's cut India's GDP growth forecast to 6.2 per cent in 2019 calendar year from its previous estimation of 6.8 per cent. Sitharaman addressed issues from taxation measures and facilitating wealth creators to lending a hand to automotive sector as well as banks and MSMEs.
Here are the measures the Finance Minister announced to help banks, NBFCs and MSMEs.
- Additional credit expansion through PSBs: Sitharaman announced that the government will release Rs 70,000 crore upfront and additional lending and liquidity to the tune of Rs 5 lakh crore to PSBs, thereby benefitting corporates, retail borrowers, MSMEs, small traders and others.
- Timely rate cuts: While RBI has been cutting the repo rate, banks were yet to pass on the benefit to consumers. The Finance Minister said that banks have now agreed to pass on rate cut through MCLR reduction to benefit borrowers.
- Reduced EMI: The minister said that EMI will be reduced for housing loans, vehicle and other retail loans by directly linking repo rates to interest rates. Working capital loans for industry is also supposed to become cheaper.
- Customer ease: PSBs will ensure return of loan documents within 15 days of loan closure to reduce harassment and bring in efficiency. This move will benefit borrowers with mortgaged assets.
- Online tracking of loan applications: In another move to benefit borrowers, Sitharaman announced that customers can track online loan applications for retail, MSME, housing, vehicle, working capital, limit enhancements, renewals and more. She said that this move would reduce turnaround time for customers, reduce harassment and increase transparency.
- Transparent one time settlement policy: The Finance Minister said that banks will issue transparent one time settlement (OTS) policy for MSME and retail borrowers to settle their overdues.
- Honest decision making: The minister said that CVC has asked Internal Advisory Committee (IAC) in banks to classify cases as vigilance and non-vigilance in order to support decision making and support genuine commercial decisions by bankers.
- Support to NBFC/HFCs: In order to give more credit support for purchase of houses, vehicles and consumption goods, Nirmala Sitharaman announced additional liquidity support of Rs 30,000 crore to HFCs. She also said that Partial Credit Guarantee scheme for purchase of pooled assets of NBFC/HFCs to up to Rs 1 lakh crore will be monitored at the highest level in each bank. Prepayment notices to banks will also be monitored by banks.
- Bank KYC to be used by NBFCs: The minister said that NBFCs have been permitted to use the Aadhaar-authenticated bank KYC to avoid repeated process. She also added that necessary changes will be made in the PMLA and Aadhaar rules to facilitate this move. Easier and faster onboarding of customers was also announced by Sitharaman.
- PSBs to fast-track collaboration for loans to MSMEs: In order to take advantage of liquidity with PSBs and last mile customer connect of NBFCs, PSBs will fast-track collaboration for loans to MSMEs, small traders and self-help groups, MFI client borrowers in co-origination mode with NBFCs.