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There's No Liquidity Crisis: Finance Minister Nirmala Sitharaman After Meeting Bank Chiefs

Issues such as liquidity, rate cut and credit disbursal were on the top agenda of discussions between FM and the lenders, an official statement said.

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Finance Minister Nirmala Sitharaman said that the service sector has shown "a high appetite" for credit.

Finance Minister Nirmala Sitharaman said on Thursday that lenders have enough liquidity and retail credit growth is likely to pick up in the festival season starting October. "Sum and substance of what I heard was that there is no liquidity crisis," Nirmala Sitharaman said at a press conference after meeting representatives of private sector banks and other financial institutions. Talks between the Finance Ministry and the banking industry on a range of issues including liquidity and credit disbursal come within a month of the government announcing a slew of measures to revive the economy.
Here are 10 things to know:
  1. India's economic growth is likely to pick up in the October-March period as consumer demand is expected to improve, the Finance Minister said on Thursday. The service sector has shown "a high appetite" for credit, she said.
  2. The government has over the past one month announced measures - such as withdrawal of higher taxes on foreign investors, a mega bank consolidation plan and a reduction in corporate taxes - to revive consumption and kick-start growth. 
  3. "Many of the microfinance institutions and microfinance units which have come here are in deep country... they said that in those areas, there is still demand and they are extending loans. All of them clearly voiced a positive growth which is a good encouraging story," Ms Sitharaman added.
  4. "The message I got is that consumption is happening," the Finance Minister said. "If there was a problem of liquidity, it was in the wholesale financing, and not in the retail."
  5. The government has invited banks to participate in the credit outreach programme spanning 400 districts, she said. In a bid to boost lending, the government had last week asked state-run banks to hold loan fairs in 400 districts.
  6. Speaking on the automobile sector, the minister said that the slowdown in passenger vehicle sales is driven by sentiment and the situation will improve in the near future.
  7. Passenger vehicle sales plunged 31.57 per cent year-on-year in August - marking the 10th straight month of decline and also the steepest fall in the segment ever, according to data from industry body SIAM.
  8. The commercial vehicle demand is a cyclical problem and the sales in the segment are likely to pick up over the next 1-2 quarters, she said.
  9. The Finance Minister also exuded confidence that the upcoming festival season will drive consumption. All financial institutions are largely optimistic about the festive season, Ms Sitharaman said.
  10. India's GDP or gross domestic product expanded 5 per cent in the quarter ended June, marking the lowest pace of growth in more than six years.




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