The government is pushing public sector banks to ease lending charges to small scale industries (Consultant picture)
NEW DELHI: The federal government is pushing public sector banks to offer further working capital to small companies at 7.5% curiosity underneath the loan assure scheme that proposes to offer as much as Rs three lakh crore, whereas additionally asking them to make sure that senior residents earn increased returns on their fastened deposits.
Whereas paring deposit rates-to make sure that all debtors profit from the decrease price regime-bankers have been requested to make sure widespread implementation of the Pradhan Mantri Vaya Vandana Yojana, which has been prolonged by three years as much as March 2023. Beneath the scheme, senior residents will probably be paid 7.4% curiosity throughout the present monetary 12 months with the speed to be reset subsequent 12 months.
With the Reserve Bank of India repeatedly lowering charges, the State Bank of India has diminished its peak fastened deposit price to five.7% for funds parked for 5-10 years. In case of senior residents, the bank is paying 6.5% a 12 months.
The message was conveyed to the bank chiefs throughout a gathering convened by finance minister Nirmala Sitharaman on Friday with implementation of the Covid package deal being the important thing focus to make sure that cash-strapped small companies can entry funds, and at decrease price.
Presently, small companies are borrowing at 11-12% from state-run lenders.
Final week, the federal government had cleared an emergency facility for enterprise enterprises with a turnover of as much as Rs 100 crore and excellent loans of as much as Rs 25 crore.
Such companies will get further 20% working capital via a authorities assure with rate of interest capped at 9.25%. Sitharaman has requested bankers to go all out to make sure that all eligible debtors profit from it.
Banking sources informed TOI that lenders had been informed that they need to additionally slash lending charges to make sure that the advantages of a discount within the RBI’s key coverage charges are handed on to debtors. On Friday, the RBI had diminished repo price – or the in a single day price at which it lends to banks – by one other 40 foundation factors. It will imply that state-run lenders will probably be decreasing charges on all loans within the coming months as they alter their deposit charges.
“Principally, the federal government needs public sector banks to lend at 7.5% though it may not be attainable for all of them. However they’ll try to work out the charges in a approach that they’ll lend across the indicative price,” a banking supply mentioned.
The finance ministry can also be asking RBI to assign zero threat weight to further working capital to small companies because the loans will probably be assured by government-owned Nationwide Credit score Assure Trustee Firm. “Since 75% of the claims raised by banks in case a loan turns NPA will probably be settled by the corporate, the credit score threat may be very low and the advantage of decrease price may be handed on to debtors,” a authorities official mentioned.
A retired banker mentioned it’s within the curiosity of banks to make sure funding to those companies in order that they’ll keep afloat.