FM warns banks against trusting credit scores of loan seekers 'blindly'

Finance Minister Nirmala Sitharaman on Wednesday told state-owned banks to not “blindly” trust the credit scores of loan seekers, and to focus on improving branch-level connect with customers. Her suggestions came on a day she launched a new set of reform measures for public sector banks (PSBs), aimed at enhancing the role of technology.

“What I will say will not be music to your ears…Go back to branch banking. There is no branch-level connect as much as it was before. Though we would want data analytics and big data because it is advantageous nationally, at the branch level, customers expect a little personal touch from you,” Sitharaman said while addressing the brass of PSBs at an event.

The FM said banks should not take the ratings given by credit rating agencies on the credit worthiness of customers as an advisory, but only as an indicator.

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“You want technology but have gone so far to blindly rely on rating agencies. A personal-level connect is no longer there. You are probably misjudging the customer based on the rating which, I do not know if, is exaggerated or underplayed,” Sitharaman said. She added the Reserve Bank of India or the government had not issued any directive to “blindly” follow the credit rating agencies. “A good judicial mix of personal connect and data is required,” she said.

The FM told the top bank executives to listen to the concerns of branch-level staff and create awareness among them related to the government schemes. “Give access to your own staff to speak to you. Hear them. Unless you do that, the flow of liquidity won’t take place,” she said. Sitharaman will be holding routine meetings at district-level branches of banks to listen to the grievances of field staff after the Parliament session ends on April 2.

After her speech, the FM held two set of meetings with the managing directors and chief executive officers of PSBs — one on the issue of micro, small and medium enterprises, and second on other areas of banking. In the meeting, she told the bankers to push the flow of credit, even as they apprised her about a lack of demand in the economy. “Banks should formulate some strategy for credit off-take. They cannot say there is a demand problem. You should reach out and push from the supply side. That’s one of the points that the FM made,” Financial Services Secretary-designate Debashish Panda told banks.

PSBs have reported Rs 95,700-crore frauds in first 6 months of FY20: FM

Public sector banks (PSBs) reported frauds of over Rs 95,700 crore in the first six months of the current financial year, Parliament was informed on Tuesday.

Finance Minister Nirmala Sitharaman said that according to the Reserve Bank of India (RBI), PSBs reported 5,743 incidents of fraud involving a total amount of Rs 95,760.49 crore from April 1 to September 30 (based on the date of reporting). She said based on the date of occurrence of frauds, during the same period, the number of frauds was 1,007, involving a total amount of Rs 2,509.86 crore.

PSBs have reported Rs 95,700-crore frauds in first 6 months of FY20: FM
In a written reply to another question, Minister of State for Finance Anurag Thakur told the Rajya Sabha that government-owned banks reported 26.1 per cent of all frauds worth over Rs 1 lakh brought to notice during 2018-19, while their lending share was 63.81 per cent in the aggregate gross advances of scheduled commercial banks.

“On this basis, the (average) number of incidents of frauds reported (based on the date of occurrence) per lakh crore advances for PSBs (11.3) is about 79 per cent lower than that for non-PSB lenders (53.7),” Thakur said. ICICI Bank reported 374 instances of frauds, followed by Kotak Mahindra Bank (338), HDFC Bank (273), State Bank of India (236) and HSBC (178).

PSBs have reported Rs 95,700-crore frauds in first 6 months of FY20: FM
In reply to a question by the Congress’ M V Rajeev Gowda on the status of cases investigated by the Enforcement Directorate, Thakur said that as on September 30, the agency was conducting investigations in 963 cases under the Prevention of Money Laundering Act (PMLA) and 7,393 cases under Foreign Exchange Management Act (FEMA).

UP loan mela: Retail, agri grab a third of total Rs 2,125 cr disbursals

Public sector banks disbursed nearly Rs 2,125 crore during phase-1 of the ongoing ‘loan mela’ programme in Uttar Pradesh.

The loan mela, spanning five days starting October 3, covered 27 districts in the state, wherein retail and agricultural segments logged the maximum advances of Rs 807 crore and Rs 564 crore respectively, totalling Rs 1,371 crore.

“During phase-1 of the loan mela, all the banks collectively interacted with around 70,000 people and received more than 41,000 applications, of which 30,879 applicants were provided with on spot sanctions worth Rs 2,125 crore,” Ramjas Yadav, general manager of UP lead banker Bank of Baroda (BoB), told the media here this evening.

He said phase-2 of the loan mela would start on October 22 across 19 districts and will continue till October 25.

Micro, small and medium enterprises (MSME) accounted for about Rs 551 crore during phase-1 of the ‘customer outreach’ programme in the state, followed by Rs 203 crore by the Pradhan Mandtri MUDRA Yojana (PMMY).

“In the next phase starting Tuesday, we will focus on providing credit for agricultural and allied activities directly related to rural income generation, such as dairy and animal husbandry. At the same time, we will encourage customers to apply for education loans,” Yadav said.

The Western UP district of Kasganj clocked the highest quantum of loan sanctions, at more than Rs 600 crore, accounting for nearly 30 per cent of net loan approvals.

“About 12-15 per cent of the total agricultural loans were provided for farm implements, including tractors,” Yadav added.

The loan melas are being organised across 400 districts in India in phases, according to the guidelines of department of financial services (DFS) under the union ministry of finance.

Under these loan melas, special focus is being accorded to flagship central schemes like Kisan Credit Card (KCC), Pradhan Mantri Mudra Yojana (PMMY) and Stand Up India (SUI). At the same time, emphasis is being given to financial inclusion schemes and encouraging consumers and merchants towards using digital payment systems.

Govt to upfront infuse Rs 70,000-cr capital into public sector banks

Finance Minister Nirmala Sitharaman on Thursday announced upfront capital infusion of Rs 70,000 crore into public sector banks, a move aimed at boosting lending and improving liquidity situation.

The move is expected to generate an additional lending and liquidity in the financial system to the tune of Rs 5 lakh crore, she said at a press conference.

The finance minister further said that banks have decided to pass on RBI rate cut benefits to borrowers through MCLR reduction.

Sitharaman said that banks will launch repo rate and external benchmark-linked loan products that will lead to reduced easy monthly installments for housing, vehicle and other retail loans.

"Working capital loans for the industry will also become cheaper," the minister said.

Sitharaman said that to reduce harassment and bring in greater efficiency, public sector banks will ensure mandated return of loan documents within 15 days of loan closure. "This will benefit borrowers who have mortgaged assets.