Ministry of finance for banks

Ministry of finance for banks

Finance Minister Nirmala Sitharaman and heads of state-run banks are set to work out ways to remove the irritants that hold back credit delivery to industries despite various government and banking regulator measures, and to review the progress of various schemes and tweak them if necessary.

This news was reported by one of the people who is aware of the issue described above.

Bankers are likely to propose to the minister that the payment moratorium needs to be extended as companies are still limping with a majority of them to start operations and that criteria for identifying a default as bad loans need to be revised.

According to one of the bankers, “There are a range of issues on the agenda, including the work capital items introduced by banks and the RBI system, but most importantly, we will be discussing the need to extend the moratorium with the Minister”.

Since the government has announced an official announcement in March to prevent the spread of Covid-19 virus, various schemes have been implemented by the central government and Reserve Bank of India, including payment moratorium and liquidity initiatives to help businesses remain afloat when cash flows have dried up. The meeting will take place via a video-conference.

Banks are also set to discuss the roll-out of the Rs 3 lakh crore MSME package and the extension of the partial credit guarantee scheme to NBFCs with the finance minister. This meeting was expected to take place on May 11 earlier.

According to another banker, "The Financial Services department will make a presentation based on the credit numbers shared by banks over the past two months. During this period each bank extended loans by working capital or other means. The purpose of this meeting is to increase credit flows and the Minister can draw attention to various schemes which can be used".

The RBI has allowed banks to extend a three-month moratorium on all loan payments on March 27.

On April 17, the regulator allowed all overdue accounts to have a 90-day asset classification standstill as on February 29. Those relaxations will end on May 31.

In a proposal to the RBI, banks sought to ease the norms for bad loan identification from the existing 90 days to 180 days and extend the moratorium on loans and the standstill on stressed accounts by at least one quarter more.

Bankers said they'll also share their input on the already implemented schemes and suggest ways to develop.

Banks have sought to consider loans extended to overdue accounts within the standard category, or classified as a standard restructured asset, resulting in lower provisioning. We have pursued a one-time restructuring of all loans and a limited term loan program for sectors under stress due to the situation.

According to PSU banker statement, "We 're also going to share some input and flag any ideas we have. Essentially, the government needs credit to flow into industries that need it and that will give us more insight on what the minister thinks exactly".

Ministry of Finance is playing a very important role in maintaining the funds for the country. Union Finance Minister Nirmala Sitharaman met with the Heads of Public Sector Banks (PSB) via a video conference on economic package operationalization under the initiative “AtmanirbharBharat”.

This is the situation where working of all ministries as well as banks together can help us revive from circulation of funds across the country.

The Finance Ministry has been working together with banks in order to have their suggestion too in order to help the country in these times of emergency.