Union Finance Minister Nirmala Sitharaman met bank chiefs on Monday to focus on banking sector's credit growth. (File photo)
New Delhi: Getting into action mode to avert a further slowdown in key sectors, Finance Minister Nirmala Sitharaman on Monday said the government will meet representatives from various sectors of the economy facing the heat of sluggish demand and consumption for preparing a policy response incorporating their inputs.
Finance Secretary Rajeev Kumar said that the government will hold a series of meetings with stake-holders from various sectors to get into causes of the problems and as part of this, the Minister will meet MSME representatives on Tuesday, representatives of the auto sector on Wednesday, and those from industry on Thursday.
Sitharaman will meet financial sector representatives on Friday and realty sector representatives and home buyers on Sunday.
In line with this objective and to review public sector banks and also the overall banking sector, the Finance Minister on Monday met bank chiefs and the meeting focussed on banking sector's credit growth to support growth. The meeting also discussed credit needs of NBFCs, the auto sector and MSMEs, Kumar said.
The meeting also discussed transmission benefits of rate cuts to borrowers and industry to revive demand. The overall credit growth of the banking sector continues to be in double digits at 12 per cent.
The slowdown in various sectors is seeping into the economy. Auto parts makers have been hit hard by automobile companies cutting production to trim inventories, amid weak demand.
Recently, auto-makers such as Maruti Suzuki Ltd, Tata Motors Ltd, Mahindra & Mahindra Ltd (M&M), Ashok Leyland Ltd and Honda Motorcycle & Scooter India Ltd announced temporarily closure of their plants. July figures suggest that passenger car sales have slipped by over 29 per cent, making it the worst month in the past two decades.
Economy has come to a near standstill with the growth of 8 core sectors slowing to 0.2 per cent in June. The government has also revised downwards the growth rate of these eight sectors for May to 4.3 per cent from the earlier estimate of 5.1 per cent.
The Finance Minister also touched the three current issues that have spooked the market -- FPI tax, sovereign bonds and the raising of minimum shareholding in listed companies to 35 per cent from the current 25 per cent. All the three were Budget announcements and the market has tanked heavily because of these.
On FPI, Sitharaman said: "I have made it absolutely clear that if there are FPIs who want to tell me something about... I am quite open to hearing out what they have to say. We have not just left it at that. The list of meetings that is planned, in that the meeting with the stock market and investor representatives are also meeting us. And Separately, Secretary, DEA (Atanu Chakraborty) has also called out some time so that he can meet FPIs separately, so he can have their views. I will also meet the FPIs in that DEA Secretary's meeting as well."
FPIs have pulled out over Rs 20,500 crore over the super-rich surcharge.
The carnage began since July 5, when the Budget proposed a levy of an additional surcharge on individuals and trusts earning more than Rs 2 crore and Rs 5 crore. On July 18, while ruling out tweaking the FPI surcharge, Sitharaman said that trusts should register as companies to be out of the ambit of the surcharge.
"Some FPIs are registered as trusts. Therefore, as an individual entity, they come under taxation. Such FPIs who have registered themselves as trusts may consider the option of wanting to move to register as company," she said in her reply to the debate on Finance Bill, 2019 in Parliament.
But this has not helped.
The market was sceptical on the Budget announcement of raising the shareholding from 25 per cent to 35 per cent in listed companies and CPSEs.
The Finance Minister said she welcomed market regulator Sebi starting consultations over this before a stand is taken.
"On 25 per cent to 35 per cent shareholding, I think the Sebi had come out saying they are initiating consultation to hear the views much before a position is taken and this mention was there in the Budget speech, not as a part of decision which has been made already. But (it is) something on which we were keen to get a view and Sebi has started the process of hearing various stakeholders on the matter. It is only at that stage and there is nothing beyond that. From the ministry, we have not initiated anything," she said.
On the much talked-about sovereign bond scheme, as announced in the Budget, where former RBI Governors have been sceptical about its need and success, Sitharaman said: "It was mentioned in the budget... I know some numbers were floating around because the earlier Secretary had mentioned it.
"After the mention in the budget, there has not been much work on it because we have been busy with passing the three bills in the Parliament. On the sovereign bonds, nothing more has been done by the ministry. It is at the stage of announcement only. I am not speculating on the tranches, number, amount.... nothing of that has been decided."
The Ministry, in statement on Sitharaman's Monday meeting, said banks have agreed to take steps as per RBI guidelines. The bank credit to the NBFC and housing finance companies has risen by about Rs 90,000 crore since September 2018. The banks have also committed to give credit to vehicle loans and MSMEs. They have also been asked to proportionately transmit rate cuts in lending.