Finance minister Arun Jaitley on Tuesday asked banks and lending institutions to make higher resources available to the unorganised sector in the economy. “It is a fact that people in the unorganised sector are much higher than the organised sector, but the former gets credit with a lot of difficulty,” he said.
“If the resources of banks and financial institutions through various schemes are diverted towards this (unorganised) sector, it will help create more employment,” he said at a National Bank for Agriculture and Rural Development event. NABARD has completed 25 years of its financial inclusion initiative called self help group (SHG) bank linkage programme, which is aimed at delivering the savings and credit services to rural poor.
Jaitley said SHGs have been beneficial in generating lakhs of jobs in rural areas. Since most SHGs are women-led, these have brought in financial security for rural women, Jaitley said. The SHG movement that started 25 years ago with a very few entities has now crossed the 85 lakh mark, he said. The repayment capacity of people associated with SHGs and availing micro-finance products is much higher, Jaitley said.
Since its pilot stage in 1992, the SHG programme of Nabard has covered more than 10 crore rural families. “As on 31st March, 2017, these groups had savings of more than Rs 16,000 crore in banks and double of that amount in their internal lending. The programme had a catalytic effect in sourcing collateral free loans to the tune of Rs 61,000 crore to these poor women from the mainstream banking system at the normal rates of interest,” the finance ministry said in a statement on Monday.
Meanwhile, speaking on sidelines on the same event, former Reserve Bank of India Governor C Rangarajan said it could take at least one year for the resolution of non-performing assets initiated by the RBI especially for large accounts. The RBI last month directed banks to refer 12 troubled companies with a combined debt of around Rs 2.5 lakh crore for corporate insolvency resolution. He said the NPA clean-up exercise has to be done and some “haircut” in loan values is inevitable.
“With the haircut, loans should become performing. Some adjustment is needed. After all, we have always done one-time adjust in the past. The size of NPAs has become big so this step is required. Without finding solution to NPA, we will not be able to move forward in terms of stimulating economy and investment,” he said. On bank consolidation, Rangarajan said the initiative for merger should come from “banks themselves and there must be felt a need for it.” State Bank of India recently merged its five associate banks with itself. The finance ministry has indicated the scope for merging 3-4 more banks. He said India needs to have a variety of banks including large banks and small banks.