The recent loan mela, which was pitched as a solution to improve credit flow to retail borrowers and small enterprises, could make only a marginal difference to credit uptake from the preceding fortnight, two senior bankers with large public sector lenders said. The Reserve Bank of India (RBI) is yet to release credit data for the period.
The loan mela was conducted by various public sector banks during 1-9 October across 250 districts to meet demand during the festival period. This was part of a series of measures by the government to boost demand, amid concerns of falling GDP growth. However, according to the bankers cited above, who spoke on condition of anonymity, early data trends indicate only a minor uptick in credit offtake from the corresponding period a year ago.
According to RBI data, non-food credit growth during the fortnight ending 27 September slowed to 8.7% year-on-year (y-o-y). Data for the period covering the loan mela is not available yet. The finance ministry has said that banks disbursed ₹81,781 crore loans during the mela, but the bankers cited above said this includes many loans sanctioned earlier, but disbursed during the mela.
“Around ₹55,000 crore of disbursals were from sanctions during the outreach programme and the rest were from loan approved prior to that,” the first banker said. He added that there is typically a delay between sanctioning and disbursement to a customer’s account.
The net increase in outstanding non-food credit between the fortnights ended 13 September and 27 September was ₹64,303.8 crore, according to RBI data. However, since RBI’s outstanding bank credit data is net of repayments by borrowers, the absolute number is not comparable with the disbursement data provided by the finance ministry.
Loan melas have often been used to push credit and increase consumption. Under the latest scheme, 400 districts (250 in phase one and 150 in phase two) in the country were divided among banks where they would lead the initiative. While every lender could participate in all of these districts, the specific lead bank was in charge of the overall campaign, logistics and management for those districts.
Typically, a loan mela starts around 9am, in which outdoor stalls are set up by various banks in various locations and are sometimes kept open even till midnight, depending on customer footfalls. Moreover, entertainment programmes were also organized to woo people to the mela.
“During this period, new products were introduced, vehicle dealers tied up for festive discounts and real estate builders gave discounts because of the huge inventory they are sitting on,” the second banker said.
The second phase of the loan mela starts on 21 October.
Both bankers said there was product-specific targeting of customers in all districts under this programme.