Infra push will have multiplier effects: FM

Banks need to be more customer-friendly. Banks don't have to be lenient on credit underwriting standards by taking any adverse risks on a proposal

- Nirmala Sitharaman, FM

Keen on digital solutions

- New age tech applications to be deployed in education, farming sectors

- Policy support to innovation, startups

- SBI's Chairman Dinesh Khara seeks sufficient equity to enhance lending support

- Underutilisation of working capital pointing to slowing demand

Mumbai: Union Finance Minister Nirmala Sitharaman on Monday said the government wants a sustained recovery and the budget proposals on infrastructure building are an attempt to create the multiplier effect to help the economy.

Speaking at a post-budget interaction with the industry in the financial capital of the country, Sitharaman said the budget has been prepared at a time when the economy is coming out of the impact of the pandemic. "A sustained recovery is what we would want. The budget has growth revival as a priority along with messages for sustainability as a priority and on predictable tax regimen," she said. Stating that technology has helped the government make payments to the affected people during the pandemic, Sitharaman said it is also looking at how digital solutions can be deployed in the education and the farming sectors. The government wants to push innovation and the support to help the startups will continue, Sitharaman added.

The revival of economic growth was the foremost priority of the Union Budget FY23, said the FM, who further added that "the recovery is the one most important thing we must have to focus our attention on. And, a sustained recovery, a strong recovery is something which all of us would want.Therefore, this Budget probably gives more space, attention and focus on keeping that growth revival as the priority and it also has clear messages for sustainability, predictable tax regimen... transparency in the process of Budget making."

The Budget FY23 has raised capital expenditure by 35.4 per cent Rs 7.5 lakh crore in a bid to continue the public infrastructure plan which in turn will create fresh jobs in the economy besides crowd-in private participation through investments."

Spending on infrastructure was chosen as a more favourable route because it ensures greater multiplier effect, and with the greater multiplier effect we hope assets can be created which can last us for several decades."

Furthermore, she pointed out how the country adapted to technological advancements during the pandemic, specially in the space of online payments.

"We could reach people in their homes and could give money into their accounts all because of the technology which has been spread and adopted by our own people," she said. Besides payment service, the Centre is focused on technology for the education sector, farming, among others, she said adding that the Centre would not let digital advantage go which the country has had.

Nirmala Sitharaman said banks need to focus more on being customer-friendly so that the process of availing credit becomes more hassle-free for borrowers.

However, the minister made it clear that banks don't have to be lenient on credit underwriting standards by taking any adverse risks on a proposal. At a meeting between industry representatives and the finance minister, a startup founder in the baking business suggested for credit to be available hassle-free, to which largest lender SBI's Chairman Dinesh Kumar Khara said a startup's worries are more on the equity side and assured full support in lending if sufficient equity is on the table.

Later, he also made a mention of the government's Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). Stressing that the person asking the question is a woman operating an innovative enterprise, Sitharaman had a few suggestions for the banking community and also spoke out against their attitude. "Initially, Mr Khara gave a very bland answer. And then after being prompted somewhat, he went into talking about a scheme which has a lot of government support, the CGTMSE," she said. "Banks will have to be a lot more customer friendly. Not to the extent of taking adverse risks which you don't need to take, but you need to be a lot more friendly to customers," the minister said. Khara said the focus is on increasing the reliance on end-to-end digitalisation of the process, which will ensure a hassle-free experience. He said in the next two months, the bank will go fully digital for lending. Also, provided there is credible cashflow visibility available to a bank, the credit growth to small businesses can touch that of personal loans over time. Tarun Bajaj, the revenue secretary who has worked in the Department of Financial Services as well, said banks need to be cognisant of the needs to lend more and support the economic growth. He added that the balance sheet of corporates is in better shape now. Khara said it is a normal perception that banks do not sanction loans, but pointed to very high levels of underutilisation of sanctioned working capital limits, which generally point to slowing demand in an economy.

He said even after a nine percentage points improvement in a quarter, the underutilisation of working capital is as high as 52 per cent for the country' largest lender. Khara said his optimism on growth in lending to small businesses in the future comes from the experience in the retail banking space and the changes in lending, where the balance sheet alone is not important but access to cash flows of an entity also helps. Earlier, the head of SBI hinted at seeking some relaxations on the stressed asset recognition in rural areas from the finance minister, saying the mofussil areas are yet to come out of the impact of the pandemic. "If there can be some relief for the rural sector in terms of the way we are identifying the accounts. Rural sector is still in the need of some support, though we are trying to extend it, whatever can be done from the banking sector. "But yes, in terms of identification of stress in the accounts, if there can be some relief, perhaps it would require the intervention of the regulator," he noted.