FM to discuss external benchmarking of loans, MSME credit with pvt bankers

When Finance Minister Nirmala Sitharaman meets top management of private banks and financial institutions on Thursday, she might discuss external benchmarking of retail loans as mandated by the Reserve Bank of India (RBI) from October 1, and how banks were spreading awareness among customers about the move. The meeting will begin at 5:30 pm.

Concerned over poor transmission of interest rates by banks, the RBI had earlier this month mandated that all banks will have to link retail loans with an external benchmark, such as the repo rate. All lenders are supposed to introduce such products by October 1.

Sitharaman will take stock of how the lenders are supporting the needy segments of borrowers, such as micro, small and medium enterprises (MSME) and non-banking financial companies.

Even as the MSME sector feels the pinch of an economic slowdown, credit to the segment has taken a knowck lately. After a series of defaults by Infrastructure Leasing and Financial Services (IL&FS) last year, the NBFC sector has been the most impacted in terms of fund crunch.

The finance minister will also discuss with private lenders about their experience with liquidity infusion facilities provided by the National Housing Bank.

The meeting with private banks comes a week after the finance minister met with the chief executives of public sector banks (PSBs) last Thursday. Sitharaman had announced a slew of measures, including loan camps across 400 districts of the country and that PSBs would not declare stressed MSME assets non-performing assets, as suggested by an RBI circular.

Sitharaman is expected to hold a press conference at around 7 pm.