Experts have hailed the government move to offer long-term interest-free loans to states to promote iconic tourist centres, saying that this will help boost development and, in turn, spur credit growth.
Finance Minister Nirmala Sitharaman made the announcement as part of the Union Budget speech for FY25 on February 1.
“States will be encouraged to take up comprehensive development of iconic tourist centres. The government will provide long-term interest-free loans to promote iconic tourist centres,” she said in her budget speech. "A framework for a rating of the centres based on the quality of facilities and services will be established. Long-term interest-free loans will be provided to states for financing such development on matching basis," the finance minister added.
Experts gave a thumbs up to the move. "Whenever the central government gives such kind of subsidies to the state governments, this leads to construction activities through contractors and business houses,” Charan Singh, non-executive chairman of Punjab & Sind Bank, said. “They bring back money to commercial banks. In this whole process, commercial banks get benefit from it. So, giving interest-free loans to boost tourism is a good step of Union government."
Singh finds an echo in Sanjay Aggarwal, senior director of Care Edge Ratings. "This will lead to substantial growth in the bank's credit portfolio. Spiritual tourism in India is also growing fast. We create a lot of infrastructure on this. Overall development of banks will provide more developments for the banks," he said.
Seeking opportunities
Several public and private sector banks have recently begun looking to expand their physical presence near the Ram Janmabhoomi in Ayodhya and open ATMs or branches to cash in on the expected rise in business associated with the inauguration of the Ram temple in Ayodhya. Banks expect the inflow of visitors to the temple post-inauguration to give them a business boost.
"Because of the upcoming business opportunities in Ayodhya, the proposal of opening a new branch is under active consideration by the Bank. A decision in this regard will be soon shared with you,” said a spokesperson for J&K Bank.
On January 11, Moneycontrol reported that at least two state-run banks are now looking to expand their physical presence near the Ram Janmabhoomi in Ayodhya and open ATMs or branches.
"This will help banks and financial institutions to also expand their business by funding newer tourism enterprises in those sites where such initiatives are being taken. It will give more business opportunity as a ripple effect," said Jiji Mammen, ED and CEO of Sa-Dhan, an association of Microfinance and Impact Finance Institutions.
However, two public sector bankers said that this will help the lenders in expand their presence since it will boost tourism. "Out of this, banks will get benefited and the government will bear it. Its similar to subsidies," said one of the public sector bankers who did not wish to quote the name.
News agency PTI reported in August 2023 said that the number of foreign tourists who arrived in India during January-June 2023 is 106 percent more than 21.24 lakh registered in 2022. As far as domestic tourism is concerned, the figure stood at 677 million in 2021 and grew to 1,731 million in 2022, the PTI sources said.
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