Nirmala Sitharaman: Have urged RBI Governor to expedite customer payments

Sitharaman said there was sufficient demand for retail loans and banks have enough liquidity to service customer needs.

Union Finance Minister Nirmala Sitharaman

Public sector banks have disbursed loans worth Rs 81,781 crore in loan distribution programmes organised during October 1-9, Finance Secretary Rajiv Kumar said Monday. Of the Rs 81,781 crore, new term loans worth Rs 34,342 crore have been disbursed, Kumar told reporters following a review meeting with heads of public sector banks held by Finance Minister Nirmala Sitharaman. The second credit outreach programme would be organised from October 21-25.

Sitharaman said there was sufficient demand for retail loans and banks have enough liquidity to service customer needs. On the issue of withdrawal restrictions at Punjab and Maharashtra Co-operative (PMC) Bank, she said the Finance Ministry is closely monitoring the situation and has been in discussions with Reserve Bank of India Governor Shaktikanta Das, who has assured that customers’ interest will be protected.

“The RBI Governor has assured me that he will keep the interest of customers in mind, and at the earliest try resolve it … I had discussion with RBI Governor this afternoon and I am closely monitoring it,” she said.

Earlier this month, the central bank slapped restrictions on PMC Bank, a leading cooperative bank headquartered in Mumbai, appointed an administrator and superseded its board of directors, sending shock waves among thousands of its depositors.

The bank was funding a clutch of companies, mainly in the troubled real estate sector, led by HDIL. Commercial banks have already declared HDIL a defaulter.

On August 20, the National Company Law Tribunal (NCLT) admitted an insolvency plea moved by Bank of India against HDIL in connection with a Rs 522-crore loan default.

PMC Bank allegedly extended 70 per cent credit of out of its Rs 9,000 crore in total advances to HDIL through fraudulent means.

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“Government has been on its toes in terms of bringing the assets of these promoters (indulged in fraud) of the bank … process will not suffer for want of enough assets which can eventually help paying back customers. In fact, my appeal to (RBI) Governor this afternoon was if there are so many assets, is there anyway RBI can expedite in terms of paying to customers who are genuinely suffering,” Sitharaman said.

She also said the Centre could consider raising deposit guarantee limit from the existing Rs 1 lakh. If it happens it will be through Parliament, she added. The Deposit Insurance and Credit Guarantee Corporation insures each depositor in a bank up to a maximum of Rs 1 lakh for both principal and interest as on the date of liquidation/cancellation of the affected bank’s licence or from the date of amalgamation/merger.

The Finance Minister said she had discussion with Das over whether the deposit guarantee of Rs 1 lakh can be released instantaneously. But the RBI Governor informed that the deposit guarantee is released only after the bank is closed and not when it is a going concern, which is the case for PMC Bank, she said.

Sitharaman further said that banks are working to ensure that retail credit is extended as per their prudential guidelines. In order to ensure liquidity for small businesses, she said that banks have been asked to provide bill discounting facility to the MSME sector against payments due from the large corporates.

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According to returns filed by the large corporates to the Ministry of Corporate Affairs, around Rs 40,000 crore is due to the MSME sector, and the government is working to ensure that MSMEs get their dues ahead of Diwali festival on October 27.