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Millions of Indians to get Diwali loans to boost battered economy

Millions of Indians to get Diwali loans to boost battered economy

AFP
New Delhi
Millions of Indian public servants will be offered loans of around US$135 -- to be repaid over 10 months -- in a bid to boost spending and salvage the coronavirus-ravaged economy, the government said Monday.
The offer comes days after the World Bank said the economy would contract by nearly 10 percent this year, and coincides with next month’s celebration of Diwali, one of the country’s most important religious festivals.
Finance Minister Nirmala Sitharaman said federal government employees would also be allowed to spend about US$3.8 billion worth of unused travel benefits -- which are part of their salaries -- on goods and services.
“Festivals are coming... and we want to tell you that in the next six months spend the money on buying goods that will help your family,” Sitharaman told a news conference.
With the loan scheme, the government will spend 80 billion rupees (US$1.1 billion) to give government employees a 10,000 rupee ($135 dollar) salary advance to be repaid over 10 months. Sitharaman said the plan, aimed at encouraging Indians to spend some of their savings, would generate about US$4.9 billion for the economy.
The measures “would energize growth over the remaining part of the year”, the Federation of Indian Chambers of Commerce and Industry said following the announcement.
The government has also set aside US$1.6 billion for 50-year loans to states to spend on roads, defence and other infrastructure by March.
The stimulation measures would not fuel inflation or put public debt “on an unsustainable path”, Sitharaman said.
India has been easing a nationwide coronavirus lockdown since June but millions have lost their jobs.
The Indian central bank’s recent move to rationalise risk weightage on home loans and link it only to loan-to-value (LTV) ratios for new sanctions up to March 2022 is expected to make more credit available to borrowers. It will also bring down cost of funds to buyers, and improve demand for homes, said developers and consultants.
The bank also hiked the single-party exposure limit for loans to retail and small business loans from Rs 5 crore to Rs 7.5 crore. Home loans will now attract a risk weight of 35 percent where LTV is less than or equal to 80 percent, and a risk weight of 50 per cent where LTV is more than 80 percent but less than or equal to 90 percent.

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