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Assess Note Ban Impact on Loan Offtake: Govt to Banks

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Leading lenders told to provide easier loans on priority to labour-intensive sectors
The government has asked leading banks to assess credit offtake in some of the most labour intensive sectors in the wake of demonetisation and push for easier loans on a priority basis, a move that comes amid concerns over potential negative impact of the cash crunch. Sectors including textile, leather, footwear, gems and jewellery, and construction are under the scanner, government officials said.
The industry department along with the financial services department plans to hold a meeting with the banks, ministries concerned and industry representatives in the coming week to further discuss the matter.
“We want to push all such sectors which employ a large number of people, especially since many have suffered losses during the demonetisation exercise,“ said a senior government official, who did not wish to be identified.

The government will assess credit offtake in these sectors and ask the banks to plug the gaps in availability of funds.“Many sectors have been hit and the government needs to provide some hand holding through policy. “Once the economic cycle picks up the demand for credit will increase as well,“ said DK Joshi, chief economist, Crisil.

Alongside, the government is focusing on these sectors in its Make in India campaign to boost manufacturing and increase the share of these sectors in overall GDP growth. The sectors have been shortlisted on the basis of their potential for employment generation in the country, official said.

India's working population is likely to increase more than 64% by 2021 according to the Economic Survey 2014, posing a big challenge for the government to create adequate number of jobs.

Various companies from leather, textile and cement sectors had raised con cerns of falling output with the Department of Industrial Policy and Promotion as a result of the government's decision on November 8, 2016 to withdraw old `500 and `1,000 notes as legal tender.

These companies highlighted pro blems related to procurement and transportation of raw material, and payment of wages to workers.

According to data released by Reserve Bank of India bank credit growth fell to a 62-year low of 5.1% in 2016 from a year ago. The labour intensive sectors took a greater hit. “The pain period should be getting over soon. Most sectors, whether cash linked or not, get affected since they are interlinked,“ Joshi said
The Economic Times New Delhi,20th January 2017

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