FICCI-IBA Bankers Survey suggests ways to cope various economic problems

New Delhi: Rural distress should be addressed through developing infrastructure and pushing demand by increasing pace of fund transfers under PM-Kisan and employment guarantee schemes, according to an industry-banking survey.

Banks are currently exercising caution while taking exposure to large enterprises due to apprehensions on asset quality, lower economic growth and sector-specific risks, among others, said the ‘FICCI-IBA Bankers’ Survey July-December 2019′. A total of 18 banks from public and private sectors and foreign banks participated in the survey.

These banks together represent about 50 per cent of the banking industry by asset size. Banks are of the view that rural distress should be addressed through laying emphasis on rural infrastructure development and stimulating demand by increasing the pace of fund transfers under the PM-Kisan and MGNREGA schemes, industry body FICCI said in a release on Sunday. Some of the respondent banks also suggested that the government should undertake structural land and labour reforms while taking measures to increase job creation in the country.

A large number of participating bankers have mentioned that addressing the taxation issues by launching a GST 2.0 regime and bringing a direct tax code should be the top priority of the government at this moment, it said. The lenders also recommended an increase in capital flow into micro, small and medium enterprises (MSMEs), which form a crucial part of the economy.

They also said an online platform should be developed to help banks accelerate the SME lending process. Their suggestions also include development of creative ways of credit assessment such as using psychometric testing, cash flow estimates or qualitative credit assessment and keeping NPA in the sector under check through reclassification of the Income Recognition and Asset Classification norms for MSMEs.

The survey also found that lower proportion of respondent banks reported a decline in non-performing assets (NPAs) as compared to the previous survey. ‘As compared to the first half of 2019 in which nearly 52 per cent of the respondents had reported a decline in the NPA levels, the proportion of respondent banks citing a reduction in NPAs in the current round of survey has reduced to 39 per cent,’ it added.

The proportion of the banks reporting a rise in NPAs, on the other hand, has shown a slight increase to 28 per cent as against 26 per cent in the preceding survey. Among the key sectors with high level of NPAs were infrastructure, metals, iron and steel, engineering goods and textiles.