India plans to ask state banks to expand lending to boost demand

Commuters walk past a bank sign along a road in New Delhi, India November 25, 2015. REUTERS/Anindito Mukherjee/File Photo

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MUMBAI, Aug 25 (Reuters) – India plans to ask state-owned banks to reach out to every district to expand lending to stimulate demand in the economy, the finance minister said, a move that comes at a time when most lenders are already seeing an increase in bad debts.

A similar exercise was undertaken in 2019-20 when the government ordered public banks to hold over 400 loan fairs to stimulate growth that had started to show signs of weakness even before COVID-19 hit the market. country.

“There will be credit awareness even this year in every district of the country,” Nirmala Sitharaman told a press conference on Wednesday.

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India has taken various measures to help revive the economy after two devastating waves of coronavirus infections that led to a record economic contraction.

“In order to maintain the momentum of the stimulus we have given, we have also asked the banks to come out and give to those who want to borrow from them,” Sitharaman said.

However, such a decision could weigh more heavily on lenders. Domestic banks have struggled to contain bad loans, particularly in their retail portfolios, as the pandemic and resulting lockdowns have hit economic activity and limited borrowers’ ability to repay debt.

India’s largest lender State Bank of India (SBI.NS) posted a quadrupling in slippages, or new bad loans, for the first quarter, ending in June, as its home and small business lending segments struggled.

Lenders have not only witnessed a higher level of defaults in unsecured credits such as credit cards and personal loans, but also in much more isolated segments such as home loans.

Indian Revenue Secretary Tarun Bajaj said at the same press conference that the government could announce rules allowing companies to register overseas in the next budget in February.

The comments confirm a Reuters report that India would take around six months to announce rules allowing companies to register overseas – taking longer than expected while the Ministry of Finance solves problems related to taxation.

“To make it (the foreign registration rules) a success, there would be requirements of certain amendments in the legislation to ensure the smooth trade of these outside the territory of India,” said Bajaj.

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Reporting by Nupur Anand and Aftab Ahmed; Editing by Alison Williams

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