India plans to ask state banks to extend lending to boost demand

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Commuters walk past a bank sign along a road in New Delhi, India, November 25, 2015. REUTERS / Anindito Mukherjee / File Photo

MUMBAI, Aug. 25 (Reuters) – India is considering asking state-owned banks to reach out to every district to expand lending to boost demand in the economy, the finance minister said, a move that comes in a time when most lenders are already seeing an increase in bad debts.

A similar exercise was undertaken in 2019-2020 when the government ordered state banks to hold more than 400 loan fairs to boost growth that had started showing signs of weakness even before COVID-19 hit. the country.

“There will be a credit campaign even this year in every district of the country,” Nirmala Sitharaman said at a press conference on Wednesday.

India has taken various measures to help jumpstart the economy after two devastating waves of coronavirus infections that led to a record economic contraction.

“In order to maintain the momentum of the stimulus that we have given, we have also asked the banks to come out and give to those who want to borrow from them,” Sitharaman said.

However, such a decision could weigh more heavily on lenders. National banks have struggled to contain bad loans, especially in their retail portfolios, as the pandemic and resulting lockdowns affected economic activity and limited borrowers’ ability to repay debt.

India’s largest lender, State Bank of India (SBI.NS) quadrupled the number of slips, or new bad loans, for the first quarter, ending in June, as its mortgage and mortgage segments. small businesses were struggling.

Lenders have not only witnessed a higher level of defaults in unsecured loans such as credit cards and personal loans, but also in much more isolated segments such as home loans.

Indian Revenue Secretary Tarun Bajaj said at the same press conference that the government may announce rules allowing companies to register overseas in the next budget in February.

The comments confirm a Reuters report that said India would take around six months to announce rules allowing companies to register overseas – taking longer than expected as the finance ministry addresses related issues to taxation.

“For this (overseas registration rules) to be successful, there would be requirements of certain legislative amendments to ensure smooth trade of these outside the territory of India,” Bajaj said. .

Reporting by Nupur Anand and Aftab Ahmed; Editing by Alison Williams

Our Standards: The Thomson Reuters Trust Principles.


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