Loan fairs infused ₹1.8L cr in economy

THE LOAN MELAS ARE AMONG THE MEASURES ANNOUNCED BY THE GOVT TO COMBAT THE ECONOMIC SLOWDOWN

The government’s recent drive to boost consumption through loan melas (fairs) organised by banks and other financial institutions in about 400 districts could result in an estimated credit flow of around ~1.8 lakh crore, and its full impact on the economy is expected in the coming quarters, a top government official said on condition of anonymity.

In the first phase of the customer outreach initiative (October 1-9, 2019), public sector banks (PSBs) disbursed ~81,781 crore, including new term loans of ~34,342 crore. It is estimated that credit disbursal in the second phase (October 21-25, 2019) was around ~1 lakh crore, a finance ministry official said, asking not to be named.

The government on September 19 directed state-run banks to provide liquidity support to nonbanking financial companies (NBFC) and asked both sets of financial institutions to hold loan melas in 400 districts during the festive season to boost consumption and accelerate economic growth. The first official added that the move has already started showing results, and claimed it has helped arrest declining automobile sales. Sales of passenger vehicles saw a marginal rise of 0.3% in the month of October after 11 months of decline. It isn’t clear how much of the money disbursed in the two phases of the loan mela was through automobile loans.

The official said an infusion of over ~1.8 lakh crore in credit disbursal in just one month is bound to boost consumption and added that the trend is likely to continue in the coming months. The banks’ outreach focused on loans to new customers, particularly homebuyers.