India’s economic growth is expected to recover in the last two quarters of the current financial year since consumer demand is expected to pick up during the festive season, the finance minister added.
“I have not heard liquidity as a problem from anybody,” Sitharaman told reporters immediately after the meeting with 29 private sector lenders, including eight banks, five non-banking finance companies (NBFCs), five housing finance companies (HFCs) and four micro-finance organisations .
Her comments come at a time when there has been growing concerns over the state of the economy after government statistics showed the growth rate for the last quarter at 5%,
the slowest pace since March 2013.
The festive season, which begins with Onam in September and ends around Christmas and New Year in December, records a higher sale of consumer durables, jewellery, cars, and houses.
Small financial institutions have said there is still demand, particularly from rural areas. Private bankers said affordable housing has taken off well, Sitharaman said.
The minister added that from the feedback she received, business of commercial vehicle (CV) segment has slowed due to
cyclic problems and was expected to rebound in two to four quarters.
The slowdown in the passenger segment is due to sentimental reasons, she added.
According to private sector lenders, if there is any liquidity issue, it is in wholesale financing and not in the retail lending, the minister said.
“And the services sector is showing very high appetite for credit,” she said.
Financial services secretary Rajiv Kumar said public sector banks will hold the first phase of an outreach programme for loan customers, ‘loan mela’, on October 3-7 covering 150 districts and private lenders may also join it.
The government last week directed state-run banks and NBFCs to hold ‘loan melas’ across 400 districts during the coming festive season to boost consumption and accelerate economic growth.
Kotak Mahindra Bank managing director and chief executive officer (CEO) Uday Kotak, who attended the meeting, said private lenders will voluntarily participate in the ‘loan melas’.
“We think about one country and one financial system ... not public and private... Our dharma is to lend money prudently,” Kotak said.