Sitharaman will meet with leaders of banks and financial institutions for a two-day conference next week


New Delhi: Finance Minister Nirmala Sitharaman is due to meet with heads of banks and financial institutions next week to remove frictions in credit flows to productive sectors of the economy hit by the COVID-19 pandemic.

The two-day conference, which starts on November 17, would see the participation of all public sector banks and financial institutions (FIs).

In addition, the CEOs of six major private sector lenders and non-banking finance companies (NBFCs) including HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Cholamandalam Investment and Finance, Shriram Transport Finance and Tata Capital would also attend.

In a letter to the CEO of banks and financial institutions, the Ministry of Finance said the two-day conference will focus on credit flows in different sectors of the economy in a transparent manner.

Observing that bank credit is an integral part of economic activity, the letter states that “banks have traditionally been the main source of credit for various sectors of the economy and their lending operations have evolved in response to the needs of the ‘economy”.

In order to better understand the ecosystem and related issues, he said, a stakeholder conference is being held on November 17-18 which will be attended by the Minister of Finance and other senior government officials.

The conference would bring together Secretaries representing various Ministries to provide an overview of ongoing initiatives or projects in their respective Ministries or Departments that may require appropriation.

Industry associations were also invited to share their views in this regard, he added.

According to sources, the two-day conference would also undertake a comprehensive review of various segments, progress of government programs including Aatmanirbhar Bharat Abhiyan.

The meeting comes at a time when banks are undertaking outreach programs to push lending into productive sectors of the economy.

Since the start of the government’s nationwide credit awareness program on Oct. 16, banks have sanctioned 13.84 lakh of loans totaling Rs. 63,574 crore in 10,580 camps held across the country as of Oct. 31.

According to data shared by the Ministry of Finance, up to Rs 21,687.23 crore of business loans were sanctioned to around 3.2 lakh recipients, while car loans worth Rs 4,560.39 crore were sanctioned to 59,090 borrowers.

The meeting is expected to take stock of the banking sector, the progress of the 2.0 restructuring program announced by the Reserve Bank of India (RBI), sources said, adding that the Emergency Credit Line Guarantee Scheme (ECLGS) revamped Rs 4.5 lakh crore would also be reviewed at the meeting.

In addition, the finance minister is expected to provide an update on the bad debt or non-performing assets (NPA) situation and discuss various bank recovery measures, they said.

As a result of the recognition, resolution, recapitalization and reforms strategy of the government, the NPAs increased from Rs 7,39,541 crore on March 31, 2019 to Rs 6,78,317 crore on March 31, 2020 and then to Rs 6, 16.616 crore as of March 31, 2021 (provisional data).

At the same time, comprehensive measures have been taken to control and effect the recovery of NPAs, which has resulted in PSBs recovering Rs.

To allay bankers’ fears, the Ministry of Finance recently released a uniform ‘Staff Accountability Framework’ for NPA accounts up to Rs 50 crore.

Seeking to protect honest bank workers, the government has put in place a framework under which relevant officers will not be arrested in case bona fide decisions involving loans of up to Rs 50 crore go wrong.

The framework will only cover genuine decisions and not those involving malfeasance or dishonest intentions, according to the standards issued by the Ministry of Finance.

It specifies the details and the procedures to be followed to control these acts of omission and commission on the part of the bank agents concerned.

To save them unnecessary hassle, the framework also provides for the resolution of such cases against bankers.

“Banks must initiate and complete the staff accountability exercise within six months from the date of classification of the account as an NPA,” the ministry said.

In the past, several senior bankers have been arrested in default cases.

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