Finance Minister Nirmala Sitharaman asks Public Sector Banks to Lend

New Delhi: Finance Minister Nirmala Sitharaman on Friday asked the public sector banks (PSBs) to use funds for retail lending and to provide liquidity to the NBFCs instead of parking it with the Reserve Bank of India (RBI).

Speaking at a Assocham’s centenary event, Sitharaman asserted that there was a lot talk about there liquidity crunch but banks were adequately capitalized in the budget and post demonetization a lot of cash has come into the banking system. So the question was where did the liquidity go? she asked.

“I spent time with the RBI and banks to establish where the liquidity was getting locked up,” she added.

“Even today I have told the banks particulalrly the PSU banks that they should most speedily move the liquidity that they have and not earn out of reverse repo rate. There is no point in saving it with RBI, banks should move liquidity through direct lending or through NBFCs. I keep telling them”, Sitharaman said here.

The Reverse Repo Rate is an important monetary policy tool used by the Reserve Bank of India (RBI) to control liquidity and inflation in the economy. Under the Reverse Repo Rate, banks deposit excess funds with the RBI and earn interest for it.

After the sinking of non-banking finance company IL&FS in September last year, liquidity in the market vanished that not just led to the collapse of few more companies such as DHFL but also became the root cause of slow growth, low consumption.

Sitharaman said she is ensuring that assets of NBFCs are also being taken up and even the bottom-most NBFCs get liquidity for business. The Finance Minister said that she has a list of 50 projects that are seeking money from the recently established realty fund. (IANS)

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