Government Asks State Banks to List Successful Lending Initiatives for Wider Adoption

Government directs state-run banks to identify successful initiatives for wider adoption. The focus will be on lending to unorganised sectors, marginalised groups, and rural populations. This strategy aims to prevent credit crunches for small borrowers and MSMEs. Discussions will also cover IT updates, loan digitalisation, and risk management. The government seeks to boost credit availability for eligible businesses.

New Delhi: The government has asked state-run banks to submit a list of successful "Lighthouse Initiatives" that can be adopted across the system as part of their FY27-29 board-level strategy, and to focus on lending to unorganised sectors, marginalised groups and rural population.

"It is important that the productive sectors of the economy, importantly small borrowers and micro and small and medium enterprises, do not face any credit crunch," a government official said amid concerns that the West Asia crisis could further fuel inflation and trigger interest rate hikes. "Already we have provided support through the credit guarantee scheme," the official added.

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Successful schemes that each bank proposes will be evaluated for common application across all public sector banks (PSBs), the official said.

The strategy discussions, which will be held with each bank individually, will also cover IT updates, loan digitalisation, cybersecurity, risk management, HR and branch operations, people familiar with the developments said.

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Earlier this week, in a research note, economists at Standard Chartered said the Reserve Bank of India is likely to start raising interest rates as early as June on increasing inflation risks from higher crude prices.

"We expect 50 bps of hikes, split equally between June and August. However, if there is no hike in June, the repo rate could be hiked by 50 bps in August," the bank's India economists Anubhuti Sahay and Saurav Anand said in a note.

A bank executive, however, said a possible rate hike would make it harder for banks to raise low-cost deposits. "Interest rates across all segments will see an increase but specific interventions, like relief on processing charges, can still be passed on," the executive said, requesting anonymity.

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Another bank executive said lenders are looking to bring down customer grievances and ensure faster approvals for small-value loans, especially in the rural segment. "We will be setting up loan melas specially for schemes such as PM SVANidhi and housing loans for families with annual income below ₹9 lakh," he said.

Earlier this month, the government approved the Emergency Credit Line Guarantee Scheme ECLGS 5.0 to enable ₹2.55 lakh crore in additional credit for eligible business borrowers, both micro and small business enterprises, including ₹5,000 crore for airlines facing short-term liquidity stress.

With an outlay of ₹18,100 crore, the scheme offers a 100% credit guarantee for MSMEs and 90% for non-MSMEs and airlines on incremental loans extended to eligible borrowers.