‘Reform measures for banks already kickstarted’

Finance Minister cites reduction in interest rates, launch of more repo rate-linked loan products

Finance Minister Nirmala Sitharaman. File

Finance Minister Nirmala Sitharaman on Friday said that several steps had already been taken to implement the reform measures she had announced last week for the banking sector, including the launch of more repo rate-linked loan products by banks.

“The seven announcements we have made, particularly on the interest rate reduction and also for the banks to follow up, you’ve had quite a few product launches by the public sector banks and instructions for compliance have all been issued,” Ms. Sitharaman said at a press conference on Friday to announce the second wave of reforms the government is initiating to revive the economy.

According to the Finance Minister, eight public sector banks have launched repo rate-linked home loans, vehicle loans, mortgage, and cash-credit loan products. Last week, she had said that the government had consulted banks and that they had agreed to launch such products aimed at ensuring the transmission of rate cuts by the RBI to end consumers.

‘Instructions given’

Ms. Sitharaman also said that instructions had been given to the banks to ensure the time-bound return of loan documents following the closure of loans. This mechanism would be done through the core banking system and regional managers would be responsible. Last week, she had said that banks would return loan documents within 15 days of the closure of the loan.

 

Similarly, to facilitate online tracking of loan documents, as announced last week, the Finance Minister said that such a system had been initiated, with borrowers able to track their loans on the loan management systems of their banks.

‘One-time policy’

The government had last week announced a transparent one-time policy that will be issued by banks to enable MSME and retail borrowers to settle their overdues. Instructions for this had been issued to the banks, Ms. Sitharaman said.

“Particularly for the NBFCs, the support we had promised, which includes housing finance corporations, the partial credit guarantee schemes have all been executed,” Ms. Sitharaman said. “Sanction has begun with ₹3,300 crore already given, and above ₹30,000 crore is in the pipeline. So, liquidity is reaching them.”

The Finance Minister also said that the plan for the co-origination of loans between banks and NBFCs announced last week had already rolled into motion, with bank-NBFC tie-ups, with four NBFCs already in place.