Banking sector last week: IBC not enough for power sector stressed assets; RBI allows setting e-mandates on cards
Finance Minister Nirmala Sitharaman announced a slew of measures to contain the economic slowdown in the country on August 23.
The Indian banking industry got a major push as part of the plan to boost credit flow to the needy sectors. The first step was to assure upfront capital infusion in public sector banks.
Next, to ensure they pass on the benefit to the borrowers. This included linking home, auto and working capital loans to an external benchmark.
Earlier last week, the Reserve Bank of India (RBI)’s Governor Shaktikanta Das indicated that it may have to formalise linking bank loan rates to the central bank’s policy rate for faster transmission of rate cuts. Most public sector banks have announced their plan to follow suit.
The government has decided to inject Rs 70,000 crore budgeted for the recapitalisation of public sector banks (PSBs) in the current financial year, on an immediate basis, Finance Minister Nirmala Sitharaman said. The move will release liquidity to the tune of Rs 5 lakh crore into the banking system for lending.
Interest rates on retail loans including home and auto are set to ease further as the government has asked banks to launch a range of repo rate-linked products.
The move will ensure faster transmission of policy rate cuts to end-borrowers. Working capital loans to the industry are also likely to get cheaper, the finance minister said while announcing measures to boost the economy.
Banks have become increasingly selective and cautious while lending to non-banking finance companies (NBFCs) after the IL&FS default last year. As a result, NBFCs with expertise in lending to niche areas stand a better chance to receive bank funding as against those with mixed portfolios.
If you make regular payments to merchants through debit, credit or prepaid cards, you can now set a mandate for automated payments, just like it is currently possible to do with bank accounts. However, there are certain conditions and steps to be followed.
Lending rates are yet to see any meaningful easing despite policy rate cuts and liquidity surplus in the system. While some banks have decided to link some of their interest rates to the external benchmark, Reserve Bank of India (RBI) Governor Shaktikanta Das said he expects other lenders to take initiative and speed-up the process for better transmission of lower rates to push growth.The Great Diwali Discount!
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