Finance Minister Nirmala Sitharaman postpones meet with PSB chiefs to later this week

New Delhi: Finance Minister Nirmala Sitharaman review meeting with CEOs of public sector banks (PSBs) scheduled for Monday afternoon (11 May) has been postponed.

Sources say today's bankers' meeting with the Finance Minister has been postponed as FM has to attend the Prime Minister's video conference with the state Chief Ministers pic.twitter.com/kt1XnPOfU4

— CNBC-TV18 (@CNBCTV18Live) May 11, 2020

The meeting was to be held to discuss various issues, including credit offtake, as part of efforts to prop up the economy hit by the COVID-19 crisis. The meeting, to be held via video-conferencing, was also scheduled to take stock of interest rate transmission to borrowers by banks and progress on moratorium on loan repayments, sources said. The RBI had on 27 March slashed the benchmark interest rate by a massive 75 basis points and also announced a three-month moratorium to be given by banks to provide relief to borrowers whose income has been hit due to the lockdown. [caption id=“attachment_8193891” align=“alignleft” width=“380”]  File image of union finance minister Nirmala Sitharaman. Screengrab from finance ministry live stream.[/caption] Earlier this month, RBI Governor Shaktikanta Das held a meeting with heads of both public and private sector banks to take stock of the economic situation and review implementation of various measures announced by the central bank. The deployment of excessive funds by banks under the reverse repo route may also come up for discussion on Monday, sources said. Besides, progress under the targeted long-term repo operations (TLTRO) for the NBFC sector and micro finance institutions (MFIs), and sanctions under the COVID-19 emergency credit line will also be reviewed. Under the emergency credit line, borrowers can avail a maximum of 10 percent of the existing fund based working capital limits, subject to a cap of Rs 200 crore. Public sector banks have sanctioned loans worth Rs 42,000 crore to the MSME sector and corporates since the start of the lockdown. The finance minister had on Thursday said as many as 3.2 crore borrowers have taken advantage of the three-month moratorium scheme on repayment of loans announced by the Reserve Bank.

PSBs contacted more than 95% of borrowers eligible for emergency credit lines & working capital enhancements between March 20 - May 6. The amount sanctioned jumped to Rs 54,544 crore, more than double the amount 2 days ago. Number of cases covered more than tripled. @FinMinIndia

— Nirmala Sitharaman Office (@nsitharamanoffc) May 9, 2020

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Sitharaman also said state-owned banks have sanctioned loans worth Rs 5.66 lakh crore to borrowers during March and April, and disbursement will start soon after the lockdown is lifted. She said the banks sanctioned loans worth Rs 77,383 crore between March 1 and May 4 to provide sustained credit flow to non-banking finance companies (NBFCs) and housing finance companies. Besides, under TLTROs, total financing of Rs 1.08 lakh crore was extended, “ensuring business stability and continuity going forward”, she had said. Meanwhile, MFI association Sa-Dhan, in a communication to the finance minister, said the sector expects to lend close to Rs 50,000 crore over the next six months, mostly by way of emergency or top-up loans to existing borrowers. However, it expressed concern that there is a possibility of shortfall of collections of over 30-40 percent by September and a potential default by MFIs to their lenders to the extent of 10 percent. There is likely to be a surge in demand from microfinance borrowers, given they urgently need credit to rebuild their lives and stabilise their incomes. However, field collections will be affected given the negative impact of the COVID-19 crisis on clients’ incomes as well as uncertainty in operations post-lockdown in many districts, Sa-Dhan said. Many of the mid and small MFIs will struggle to meet their operational expenses in full, with a potential shortfall of Rs 1,500-2,000 crore. The industry employs close to two lakh urban and rural youths, and sustaining their jobs is also an obligation for the sector, it added.