Despite many incentives, small businesses have refrained from taking out new bank loans

New delhi date. 29 December 2020, Tuesday

The meeting between the Reserve Bank and the Finance Ministry was suggested to continue the enthusiasm of the banks for various loans during the recently concluded festive season.

The central bank said the growth in bank lending was stagnant, which was a matter of concern. Despite the best efforts by the government and the Reserve Bank after the lockdown, businesses have been reluctant to take out new loans as well as personal loans on an individual basis.

During the festive season in October this year, home loans, auto loans as well as loans taken by industries stood at 4.5 per cent, but the loan disbursement declined by 0.2 per cent during April-October.

Out of the various sectors, only the agricultural sector showed a satisfactory attitude towards the issue of loans. Thus, banks should not be lax in lending to various industries, the meeting said.

Looking at the performance of loans in October over the festive season, loans taken by industries declined by 1.5 per cent. Despite many incentives announced by the government, small businesses have moved away from new bank loans. Demand for bank loans from such industries has declined by 7.5 per cent.

During this period, loans to the hotel, tourism and restaurant industries grew by 12 per cent. Other areas showed a sluggish trend. However, there is a demand for new bank loans from the service sector.