Finance Ministry sets time frame for banks to disburse loans 

#GS3 #Governance 

Government steps in to revive credit flow as economic activities resume after nationwide lockdown 

  • As business activities resumed after a nationwide lockdown, the Finance Ministry swung into action to ensure credit flow to companies and set a specific time frame for banks within which a loan needs to be disbursed. 
  • In a communication to State-run banks, the government said the move is aimed at ensuring credit flow for economic activities and the guidelines come into effect from Monday when the business activities resume. 
  • In the context of resumption of business activities, timely origination, sanction and disbursement of fund-based and non-fund based credit is critical for revival of economic activity. 

Risk aversion 

  • The move comes as banks have turned risk averse to extend loans amid an uncertain economic outlook caused by the COVID-19 pandemic. 
  • As per the indicative time frames, from processing to disbursement of COVID-19 emergency credit lines, the banks have to complete the disbursement within six to nine working days of working capital loans to existing micro, medium and small enterprises; corporate and agriculture borrowers as well as financial assistance to self-help group borrowers. 
  • Working capital reassessment of up to ₹5 crore for existing borrowers have to be processed within six to nine days, while facilities of ₹5 crore and above need to be processed within 12 to 15 working days. 
  • Banks are advised to draw a detailed activity-wise time frame to achieve the turnaround time sought. 
  • The banks have to ensure wide publicity of the details of the COVID-19-related credit schemes, checklist of documents required for each scheme and time frames for communicating decisions regarding sanctions. This information needs to be tweeted by banks and tagged to the Twitter handle of the Department of Financial Services (DoFS). 
  • Banks should ensure that relevant internal communication of the above mentioned schemes along with clear responsibilities and defined time frames are conveyed to the field-level functionaries and monitored on an ongoing basis. 


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