Money News

India pushes state-run banks to step up loans to street vendors, say sources

MUMBAI (Reuters) - Banks in Madhya Pradesh are scrambling to boost lending to street vendors in a bid to bolster numbers ahead of a visit this week by Prime Minister Narendra Modi, according to sources and letters seen by Reuters.

FILE PHOTO: A man counts Indian currency notes inside a shop in Mumbai, India, August 13, 2018. REUTERS/Francis Mascarenhas/File photo

A scheme that is part of a coronavirus relief package launched this year offers collateral-free loans of 10,000 rupees ($136.13) to help an estimated 5 million street vendors, but state-run banks mired in bad debt have been hesitant to lend.

“All bank branches in the state need to immediately accept all applications submitted under the street vendor scheme and disburse loans without delay,” the Bank of India told some senior employees in a letter, in light of Modi’s visit.

Reuters reviewed similar memorandums and emails sent by Central Bank of India and Punjab & Sind Bank to employees in Madhya Pradesh, ordering them to sanction and disburse loans by Tuesday.

The prime minister’s office, the finance ministry, the Bank of India, the Central Bank of India and the Punjab & Sind Bank did not immediately respond to requests for comment.

Several branches of state-run banks were open on Sunday to distribute loans, according to one banker and an email seen by Reuters.

Bankers have also been warned of penalties if targets are not met, said two sources who spoke on condition of anonymity.

“There is so much pressure from the government and senior management to sanction these loans right now that the due diligence process has gone for a toss,” said one banker at a state-run bank.

Modi is expected to announce an infrastructure spending push here in Madhya Pradesh before dates for by-elections to 27 state assembly constituencies are set by India's Election Commission.

He is also expected to meet beneficiaries of the street vendor loan scheme, said a news website, the Print.

On Monday, India surpassed Brazil to become the nation with the largest number of infections, except for the United States, with a tally of 4.28 million.

Its economy shrank 23.9% in the quarter from April to June, in a sign that recovery could be longer than expected.

(Interactive graphic tracking global spread of coronavirus: open in an external browser.)

Reporting by Nupur Anand; Editing by Clarence Fernandez