Sandeep Dikshit
Tribune News Service
New Delhi, August 5
Public and private sector banks today agreed to take up the onus of reviving the automobile sector by infusing more credit support. At a meeting chaired by Finance & Corporate Affairs Minister Nirmala Sitharaman, the banks also agreed to prop up non-banking financial companies (NBFCs), lower charges on digital payments and pass on RBI’s interest rate cuts to their customers.
Automobile sales have been declining for the past few months in tandem with trouble-hitting NBFCs which were the primary window for loans to prospective customers. The fall in automobile sales has led to closure of dealerships across the country, production cuts by automobile companies and loss of around two lakh jobs. The government’s nudge to banks to prop up the automobile sector is expected to turn around its fortunes over the next two quarters.
Besides the automobile sector, the meeting also focused on assisting the NBFCs over and above the pool buyouts of over Rs 40,000 crore by public sector banks. The banks committed to continue supporting NBFCs by utilising partial credit guarantee from the government for purchase of pooled assets of NBFCs and HFCs of up to Rs 1 lakh crore.
Sitharaman said the government will address the issues in the economy “fairly quickly” after receiving feedback from different business sectors. She made the observation after a meeting with the top management of public sector banks, HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank and Citi Bank. RBI Deputy Governor NS Vishwanathan also participated in the review.
Sitharaman said this meeting was the first of a series to discuss current economic issues with key stakeholders, including some affected in recent months. Her next meeting will be with the MSME sector followed by the automobile sector, industry associations, financial market stakeholders, and real estate builders and home buyers. The government will factor in the takeaways from these consultations for appropriate policy responses to maintain a high growth trajectory and to address sector-specific issues.
Action plan
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Banks have committed to step up credit support for vehicle purchases in view of the decline in NBFC credit
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The banks have also committed to leverage co-origination of loans with NBFCs that will combine the former’s advantages of lower cost funds and large financing capacity with the latter’s doorstep reach
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Banks have also agreed to take steps to review their lending rates considering that RBI has cut policy rates by 75 basis points since December 2018
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