The Centre is gearing up to fight economic slowdown with fiscal stimulus. To start with, public sector banks have cut interest rates on housing, auto and other personal loans to boost consumer demand well before the festive months of Dasara and Diwali.
The government portal to sanction a Rs 1-crore loan in less than an hour is being reworked to extend credit up to Rs 5 crore to consumers. The largest public sector State Bank of India (SBI) is taking the lead.
The portal — psbloansin59minutes — launched late last year by Prime Minister Narendra Modi to give easy credit to small and medium businesses will now extend loans for housing and automobile sectors.
Cheap loans by banks is the shortest possible route to enhance retail demand and corporate activity. In the absence of easy credit, households are holding back their big-ticket expenditures and discretionary purchases during festive months.
The SBI has already announced discounts on interest rates on home, car and personal loans, and waived processing fee for car loans to attract retail customers. Next in line is a probable goods and services tax cut in September on automobile parts and housing sector.
Besides SBI, Union Bank of India, Indian Overseas Bank and Corporation Bank are planning to extend in-principle approval to loans of up to Rs 5 crore through the 59-minute portal.
The government has met over 60 bank branch heads over the past weekend and sought their views on kick-starting the stalled economy and making it a $5-trillion one by 2024-25. The key point that came out of the meeting, according to sources, was how to increase the muted rural and urban demand for consumer and other goods.
“It was decided that some dose of fiscal stimulus was needed, keeping in mind that it does not have any adverse impact on inflation, going forward,” sources said.
A fiscal stimulus is an increase in public spending or a reduction in the level of taxation that might be performed by a government to encourage and support economic growth.
The government has also restarted its public spends on infrastructure and other key sectors of productivity, which were halted during elections.
The economic stimulus comes as an aid to the monetary incentive already provided by the Reserve Bank of India (RBI) with four repo rate cuts of 110 basis points since February this year. The RBI has also asked banks to infuse funds into crisis-ridden non-banking financial companies (NBFCs), a major lender to housing and auto segments.
