Public Sector Banks to organise loan melas in 400 districts

Public Sector Banks to organise loan melas in 400 districts

Public-sector banks (PSBs) hold public meetings with borrowers for distributing loans in 400 districts of the country to boost demand ahead of the festive season. Union Finance Minister Nirmala Sitharaman announced the banks will take help from non-banking financial companies (NBFCs).

Key highlights:
  • The National Democratic Alliance (NDA) government will be following the footsteps of its predecessor, the United Progressive Alliance (UPA) government introduced the concept of loan mela to boost credit by directing banks to lend to people through public meetings.
  • The government has told PSBs not to declare stressed assets of micro, small and medium enterprises (MSMEs) non-performing assets (NPAs) till March 31 next year.
  • This will come as a major boost to the sector with its 65 million firms employing around 120 million workers the biggest job creation after the agriculture sector.
  • The government is also considering a special dispensation for the farm and MSME sectors.
National Democratic Alliance (NDA):
  • The announcements were made by the finance minister held a review meeting with top executives of PSB.
  • The RBI says there is enough liquidity in the system but we keep hearing that it is not reaching the ground level.
  • This will ensure that loans will reach people transparently.
  • Such public meetings will take place in two phases during September 24-29 in 200 districts and October 10-15 in another 200 districts in shamiana or ceremonial tents. The banks have been told to extend all kind of loans, including those for housing and vehicles.
  • The banks will avail of the special dispensation given by the RBI circular MSME sector Restructuring of Advances, dated January 1, 2019.
  • MSMEs are unable to repay loans within 90 days of the due date and their accounts will not be treated as NPAs and banks will not seize their assets and take other action for loan recovery. However, according to the RBI circular, the aggregate exposure, including non-fund based facilities, of banks and NBFCs to the borrower should not exceed 25 crores as on January 1, 2019.
  • It should continue to be a standard account as of January 1.

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