Finance ministry takes steps to up credit to key sectors

The government is now taking steps to boost the economy.

Finance ministry takes steps to up credit to key sectors
NEW DELHI: The finance ministry on Friday announced a series of initiatives, including a liquidity support scheme for housing finance companies and measures to boost credit flow to small companies and vehicle makers, to help boost the economy.

In a first, finance minister Nirmala Sitharaman will meet heads of all major commercial banks including private lenders on Monday to review matters relating to growth of credit in various important sectors such as automobiles and medium, small and micro enterprises (MSMEs).

The aim of the meeting is to review areas of priority for the banking sector in the coming months for accelerating gross domestic product (GDP) growth, the ministry said in a statement.


Concerns over the country slipping into a deeper slowdown have exacerbated with core sector growth slumping to its lowest in more than four years in June and automobile sales plunging to new lows in decades for many big companies in July.

The government is now taking steps to boost the economy.

The finance ministry on Friday also announced measures for providing liquidity support to housing finance companies (HFCs). National Housing Bank (NHB) has come out with a Rs 10,000-crore liquidity infusion facility for HFCs, which can utilise it for financing individual housing loans only. One company can draw up to Rs 500 crore, the ministry said in its statement.
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In a separate statement, NHB said the objective of this refinance scheme is to support HFCs in creating individual housing loan portfolio that falls under the priority sector, as defined by the Reserve Bank of India. “Liquidity infusion by National Housing Bank may create confidence of the market in HFCs and thus they will be able to raise more resources from other sources like the banks or the debt market,” it said. The scheme will be operational till June 2020.

The finance ministry also noted that the central bank has set up the modalities for operationalisation of one-time partial credit guarantee to public sector banks for purchase of high-rated pooled assets of non-banking finance companies (NBFCs). “The government has accorded its approval to the modalities that would be set in motion by RBI,” the statement said.

In her maiden budget speech, finance minister Nirmala Sitharaman had announced a one-time partial credit guarantee to public sector banks for purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of Rs 1 lakh crore during the current financial year. The six months’ credit guarantee scheme will cover the banks’ first loss from these assets for up to 10%.
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