Finance Minister to Private Banks: You can't Be Cruel For Loan Recovery

Finance Minister Nirmala Sitharaman took to the Lok Sabha to address the sensitive issue of loan recovery and its impact on banks and borrowers. She emphasized that the matter has been a subject of concern for the government and has been closely monitored.

The Reserve Bank of India (RBI) had earlier taken measures to curb the collection of high-interest rates by certain institutions. Sitharaman assured both private and public banks that they must refrain from resorting to aggressive means for loan recovery. She stated that complaints have been received about some banks employing ruthless methods to collect loan payments. In response to a query during the session, the Finance Minister asserted that the government has directed all public and private sector banks to handle loan recovery with compassion and sensitivity. Banks are urged to consider the humane aspect of the process.

In August last year, the Reserve Bank of India (RBI) had intervened to prevent the collection of exorbitant interest rates by certain institutions. The central bank tightened the norms for digital loan disbursement, ensuring that customers were informed before the commencement of the recovery process. RBI had also issued a set of Frequently Asked Questions (FAQs) on "Digital Lending Guidelines" to shed light on the procedures and requirements.

Finance Minister Nirmala Sitharaman emphasized that every bank has its own board, which takes decisions regarding standard and compound interest rates. She asserted that the government refrains from interfering in this matter. She also shed light on the PM Swamidhi Yojana, a scheme aimed at providing loans to the underprivileged without any guarantee. This initiative enables economically weaker sections to access loans without falling into the trap of exploitative borrowing practices.

Under this scheme, the government offers loans without any guarantee to encourage self-employment. The central government provides loans of up to Rs. 50,000 through the PM Swamidhi Yojana. However, borrowers are required to build their credibility to avail of the full loan amount. Initially, borrowers can access a loan of up to Rs. 10,000, and after repaying it, they become eligible for double the amount in the form of additional credit.

The Finance Minister's assurances come as a relief to borrowers, ensuring a more compassionate and supportive approach to loan recovery, while the PM Swamidhi Yojana aims to empower the economically vulnerable with access to loans for self-sustenance.