The possibility that HDFC's merger would put pressure on deposits was mentioned in a presentation that the department of financial services made for the FM's meeting with bank CEOs. According to sources familiar with the discussions, the government was of the opinion that the country's largest private lender will also solicit loans from HDFC customers.
It is anticipated that the merger of HDFC and HDFC Bank will significantly disrupt the mobilization of deposits and the provision of credit to small businesses. Due to its expanded balance sheet, the merged entity must provide loans to the priority sector totaling close to Rs 90,000 crore. Additionally, advances will exceed deposits by more than Rs 1 lakh crore as a result of the merger, putting pressure on the bank to increase deposits. The presentation identified a challenge in the reduction of the lending and low-cost current and savings bank account deposit base's share of the overall pie (see graphic).
At the gathering, the FM likewise requested that the banks push credit to merchants, center around rustic and homestead credit under the need area targets. Sitharaman has asked her deputy Bhagwant Karad to lead a special drive to expand the coverage in partnership with urban local bodies, days after PM Narendra Modi expressed concern about the ministry of housing and urban affairs' implementation of PMSVANidhi. Karad will travel to various parts of the country for the special outreach by the end of August.
For the scheme, the FM asked banks to "meet the targets." Banks just exceeded the 50 lakh target, despite being launched in 2020 as part of the Atma Nirbhar Bharat Package to assist street vendors affected by the lockdown. There have been 52.3 lakh loans approved thus far, totaling Rs 6,730 crore.
The focus on street vendors comes before important state and national elections, where states like Rajasthan are expected to be among the losers. Even the emphasis placed on the priority sector—from which forty percent of all bank loans must originate—is regarded as a push prior to the election.
Sector-specific goals, particularly those for MSMEs, are missed even though the overall lending level is met. For instance, the 7.5% "sub-target" for micro businesses fell short of expectations by 0.7 percent in the most recent fiscal year, but by 2021-2022, the gap was almost 1 percent.