NEW DELHI: Finance Minister Nirmala Sitharaman on Saturday tried to reassure CEOs of India’s state-run banks with promises of protection from undue harassment from investigative probes into their lending decisions, in a bid to push banks into shovelling out more credit to business. She said after a review meeting with top bankers from state-run banks that “fear of 3Cs – CBI (Central Bureau of Investigation), CVC (Central Vigilance Commission) and CAG (Comptroller and Auditor General)” was holding back banking decisions. “Decision making was getting affected” due to “concerns of bankers”, the finance minister said.
In the midst of a slowdown of the Indian economy, growth in bank credit is expected to deteriorate sharply to just 6.5-7 per cent in 2019-2020 against 13.3 per cent last year, according to ratings firm ICRA. The credit slowdown is being blamed partly on lower demand but insubstantial part due to a reluctance among bankers to lend.
A spate of investigations against bankers for loans, which went sour have created an atmosphere of suspicion in state-run banks forcing bankers to play safe by slowing down lending. “Some of the misgivings the bankers had in their minds have been explained by the CBI director (who was present at the meeting). In the coming days, CBI together with banks will have detailed discussions and workshops so that they (CBI) can explain,” she said.
The ministry “assured bankers that prudent commercial decisions would be protected,” officials said. It was also agreed that while perusing probes into bad loans, a distinction would be made between “genuine commercial failures and culpability”. To allay misgivings the agencies would also be holding meetings and workshops with bankers to sensitise both sides.
Boost for digital payments
Finance Minister Nirmala Sitharaman on Saturday said all businesses with turnover of more than K50 crore would have to offer payment option using UPI app or RuPay cards to ensure they do not charge merchant discount rates from January 1, 2020. The Department of Revenue will soon notify RuPay and UPI as the prescribed mode of payment for digital transactions without any Merchant Discount Rate (MDR), she said. MDR is the money paid by a merchant to a bank for accepting payment from their customers digitally