Public sector banks in India to suggest steps to boost economy

In a bid to shield India from the headwinds emanating from the ongoing general economic slowdown, the Central government has asked Public Sector Banks (PSB) to recommend ways to prop up growth.

At present, a culmination of factors such as high GST rates, natural calamities, subdued farm produce prices, stagnant income levels and low job generation have led to the slowdown.

Various sectors are facing a sales downturn in India and the industries such as FMCG and automobile have been hit the hardest.

In case of the auto sector, the industry recorded an overall decline of 18.71 per cent in off-take for July, the highest monthly sales de-growth in the last 19 years.

As per SIAM figures, domestic passenger car sales in July plunged by 35.95 per cent to 122,956 units against 191,979 units sold in July 2018.

Not just the main sectors, the slowdown pain has now percolated to small businesses which supply raw materials and parts to bigger industries.

Accordingly, the PSBs-led by lending major SBI have been directed to analyse the ‘ground-level’ economic and demand situation.

“We have several thousand bank branches across the country. All of them have submitted their assessment of the ground-level demand situation. Their assessment is necessary as they deal directly with the MSMEs. Now state-level meetings are going on and this will be followed by our final recommendations to the government by the first week of September,” a senior public sector bank official told IANS in New Delhi.

“We expect that by the first week of the coming month, we will be able to submit the ground-level assessment report to the government, highlighting key areas of concerns and possible steps to prop-up growth.”

Over 1 lakh bank branches under the PSBs have been activated to assess the ground-level situation.

“We have conducted meetings with our bank managers over their assessment of the situation... Overall, 80 per cent of such meetings are over, however, due to flood situation in certain areas, some assessment reports are yet to reach us,” another official with a state-run bank in Mumbai said.

Nonetheless, both the top-level banking sources, confirmed that there was no stimulus package in works coming from the public sector banks’ side. “Certain norms regarding repayment of loans by sectors such as a MSMEs, and other might be implemented. But there is no stimulus coming from the PSBs’ side as of now,” the second PSB official located in Mumbai said.

Recently, industry representatives have met to apprise her of the grim situation. This was followed by a state-of-the-economy review by the Prime Minister on August 15 with Finance Ministry officials.

Subsequently, speculation had risen regarding government’s plans for a stimulus package for India Inc.

“You need to understand ground level realities before going in for any package,” one of the bankers earlier quoted said.

The government is expected to take policy measures to complement Reserve Bank of India’s (RBI’s) rate cut for reversing the slowdown in economy, NITI Aayog Vice Chairman Rajiv Kumar told IANS.

“The RBI Governor has himself said that there are several indications of a slowdown in the economy. That is why the central bank has taken the step of further reducing the repo rate.

“So, I think that the RBI having acted, the government will also take steps because it has been recognised that there is slowdown,”he said.

In its monetary policy review earlier in August, the RBI lowered the GDP growth rate for 2019-20 to 6.9 per cent, as compared to earlier estimate of 7 per cent.  The central bank slashed repo rate for fourth time this year bringing it down to 5.4 per cent to spur growth by providing cheaper loans.

There is growing distress across various sectors and industry has demanded sops and relief package from the government to tide over the crisis.

Industry captains like Anand Mahindra, AM Naik of L&T, Adi Godrej and many others have flagged demand slowdown in the economy.

The country’s automobile sector, one of the key employers in the manufacturing sector, reported its steepest fall in vehicles sales in almost two decades in July leading to massive job cuts across the value chain.

“Policy steps are being taken and would continue to be taken to reverse the slowdown. The RBI has already acted and the government is also expected to take some measures to reverse the trend as soon as possible,” Niti Vice Chairman said.

The economic growth has been slipping quarter after quarter with January-March period GDP growth slowing to 5.8 per cent in FY19. With most macro indicators showing demand weakness, the growth is expected to have further declined in April-June period. Financial services firm Nomura expect the GDP to moderate to 5.7 per cent in the June quarter.

Indo-Asian News Service