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Government wants credit boost to three sectors

BS Economy Bureau

In a bid to reverse the economic slowdown, the government has asked banks and financial institutions to step up credit flow in housing, pharmaceuticals and the small scale industry sector, where there is a demand for funds.

Sources said after the meeting between finance ministry officials and bank and FI chiefs that the government essentially wanted to assess the impact of the recession.

They added that increased credit flow to the housing sector could push growth in core sectors of the economy like cement and steel. According to National Housing Bank data, credit flow to the housing sector increased 28 per cent to Rs 126.26 billion last fiscal and a further rise of 25 per cent is projected for the current year.

The chiefs of State Bank of India, Canara Bank and Punjab National Bank attended the meeting and have reportedly outlined a major push for housing and retail loans. Canara Bank, for instance, is targeting an increase of over three times in housing loans, up to Rs 10 billion from last year's level of Rs 3 billion.

The Small Industries Development Bank of India has already reported an increase of 8.5 per cent credit to the small scale sector. Though data for the pharma sector was unavailable, banks and FIs told ministry officials that there is a demand for funds from the sector.

The meeting was called in the wake of a major decline in credit flow. Banks and FIs were of the opinion that fears due to the dismantling of quantitative restrictions were also hampering credit flow in the economy.

The credit outstanding of banks and financial institutions was down by Rs 38.68 billion in May, 0.74 per cent less than a month ago.

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