“We had a very substantial agenda which included agri credit, lending to minorities and state of health of the banking sector. Reviving investments is a key challenge for us. Fuel supply grievances, land acquisition issues have also been discussed, which are inhibiting investments. I am going to discuss all these issues with the line ministries to push investments,” he added. (Watch video)
During the meeting, he reviewed issues related to non-performing assets (NPA) of PSBs, private sector banks and measures for prevention of new accretion of NPAs.
He advised banks to focus on sectors that are crying for credit. "Banks are being adviced to upgrade ATMs to cash accepting machines. They should identity doorstep banking to mobilize savings of the people," he said.
“Most of our problems will be over if we revive investment. Investment must be revived across the board small, medium and large industries. Sentiment is only one factor. Sentiment will change if the other issues are addressed.”
He said the bank chairmen have been candid and they have identified a number of issues such as fuel supply agreement, delay in clearances and approvals, land acquisition and government entities like NHAI and SEBs not making payment in time. A certain amount of choking in supply of credit.
“These are issues which have been identified as inhibiting. I will take up the issues with ministries concerned. Once we get the investment cycle going, once we get the investment engine started many of our problems can be solved. We have asked the banks to focus on sectors that deserve credit,” the minister said.
Asserting that the EMIs should be kept at affordable levels, Chidambaram said, “The middle class is complaining about increasing EMIs and stretching payment cycle. The middle class, which consumes consumer durables postponing purchases, and that is not good for the industry”.
He said just as investment plans must be brought forward, consumers must be encouraged to buy consumer durables that will keep the engine of manufacturing.
“EMI must be kept at affordable level so that people will buy two wheelers, cars, refrigerators, washing machines, cooking ranges, mixies and grinders.
“That will keep the engine of manufacturing going and large industries continue to produce these goods. The suppliers of parts and accessories in the small and medium enterprises will continue to do business.” he said.
Chidambaram cited the example given by the State Bank chairman that cars sales picked momentum after reduction of EMIs. SBI was selling 400 cars per day when the EMI was Rs 1,766 per lakh per month for seven years loan. The sales jumped to 700 cars per day, when the EMI was brought down to Rs 1,725. It shot up further to 1,200 cars, once the EMI was further reduced to Rs 1,699.
“I have urged the other banks to look at SBI example”, the Minister said, adding “the point is well taken.”
In order to encourage farmers to avail institutional credit facilities, the government started providing crop loans of Rs 3 lakh with an interest of 4 per cent per annum, provided the farmer repays the loan as per the repayment schedule fixed by the banks. It also started extension of benefit of interest subvention scheme to small and marginal farmers having Kisan Credit Card for a further period of 6 months for storing their produce in warehouses against negotiable warehouse receipts.
Moroever, last week, the Reserve Bank relaxed the repayment norms for Kisan Credit Cards (KCC) to help farmers tide over the difficult financial situation due to deficient monsoon.
Chidambaram said that banks have geared up to meet the requirements of drought like conditions. "Short term loans are being recast into medium term loans. Credit will be provided as per the requirement. 60 per cent of farm loans have enjoyed 3 per cent subvention, bearing a 4 per cent interest rate. Agri credit target will reach Rs 6 lakh crore. All kissan credit cards will now become debit plus ATM cards," he assured.
(With PTI inputs)