New Delhi, Dec 20 (SocialNews.XYZ) Finance Minister Nirmala Sitharaman on Friday asked the public sector banks (PSB) to use funds for retail lending and to provide liquidity to the NBFCs instead of parking it with the Reserve Bank of India (RBI).
Speaking at a Assocham's centenary event, Sitharaman asserted that there was a lot talk about there liquidity crunch but banks were adequately capitalised in the budget and post demonetisation a lot of cash has come into the banking system. So the question was where did the liquidity go? she asked.
"I spent time with the RBI and banks to establish where the liquidity was getting locked up," she added.
"Even today I have told the banks particulalrly the PSU banks that they should most speedily move the liquidity that they have and not earn out of reverse repo rate. There is no point in saving it with RBI, banks should move liquidity through direct lending or through NBFCs. I keep telling them", Sitharaman said here.
The Reverse Repo Rate is an important monetary policy tool used by the Reserve Bank of India (RBI) to control liquidity and inflation in the economy. Under the Reverse Repo Rate, banks deposit excess funds with the RBI and earn interest for it.
After the sinking of non-banking finance company IL&FS in September last year, liquidity in the market vanished that not just led to the collapse of few more companies such as DHFL but also became the root cause of slow growth, low consumption.
Sitharaman said she is ensuring that assets of NBFCs are also being taken up and even the bottom-most NBFCs get liquidity for business. The Finance Minister said that she has a list of 50 projects that are seeking money from the recently established realty fund.
The scheduled commercial banks (SCBs) credit growth moderated to 7.9% YoY to Rs 9934740 crore as on 6 December 2019, compared with 8.0% growth a fortnight ago. The credit growth has also decelerated from 13.9% at end December 2018.
Non-food credit, accounting for 98.7% of the total credit, recorded a growth of 7.5%, YoY, at Rs 9810076 crore as on 06 December 2019 as against a rise of 7.8% fortnight ago and 13.8% rise a year ago.
Public sector banks disbursed a record Rs 2.53 lakh crore in loans in October as part of outreach programmes across 374 districts in the country, as per the finance ministry numbers.
Loans to corporates accounted for Rs 1.23 lakh crore or 48.6% of the total disbursements by PSBs during the month. Non-banking financial companies (NBFCs) received disbursements of Rs 19,627.3 crore, of which Rs 15,297.2 crore were used for on-lending and co-origination of further loans.
Source: IANS
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