India’s economic growth is likely to pick up in the October-March period as consumer demand is expected to improve, Finance Minister Nirmala Sitharaman said on Thursday.
India’s economic growth in April-June fell to a six-year low of 5%.
Ms. Sitharaman added that the private sector banks had assured her that there was no liquidity crunch and there was strong demand in rural areas.
Addressing the media following a meeting with the heads of the private sector banks, non-banking financial institutions and microfinance institutions, Ms. Sitharaman said many private banks had also agreed to take part in the government’s outreach effort to increase credit offtake in rural India.
“After my meeting with the private sector bank heads, I can say it was like a tonic,” Ms. Sitharaman said.
“Not a single bank said that there was a liquidity crunch, and they all said that demand growth was strong in the deep rural areas.”
“The Finance Minister gave us two hours of patient hearing, and we all conveyed to her that there was no liquidity shortage,” said V. Vaidyanathan, MD and CEO, IDFC First Bank. “Many said that there was strong growth in demand, especially at the lower end of the spectrum, and it was growing in the range of 18-25%.”
The Finance Minister also said that the bankers told her that they felt the slump in demand for commercial vehicles was a cyclical issue, but this was not the case for passenger vehicles.
“They said that for commercial vehicles, it was a cyclical phenomenon and that it would be resolved in one or two quarters,” Ms. Sitharaman said.
“For passenger vehicles, they said it was a matter of sentiment,” she added.
Affordable housing
According to the Minister, some banks had also asked if the credit limit for affordable housing could be raised to ₹50 lakh from the current ₹45 lakh.
“Lenders flagged the need for self-declaration of their present address with respect to lenders who are already e-KYC authenticated to enable hassle-free lending and ease in the co-origination of loans by banks and NBFCs,” a source who attended the meeting said.
“The Minister said instructions to address the issue would be given by October 1,” the source added.
(With Reuters inputs)
