FM will meet PSB officials on Monday; can incentivize them for credit growth
Finance Minister Nirmala Sitharaman is due to meet the heads of Public Sector Banks (PSBs) on Monday to review the performance of the lenders and the progress made by them on various plans launched by the government for reviving the economy.
Banks would be urged to sanction lending to productive sectors to speed up the economy’s recovery in the face of headwinds, including from the Russia-Ukraine war, sources said.
Last week, during the Ministry of Finance’s iconic week celebration, banks conducted outreach programs across the country where eligible borrowers approved loans on the spot.
The finance minister would provide an update on credit growth, asset quality and banks’ business growth plan, sources said, adding non-performing assets (NPA) of Rs 100 crore and the state of the recovery would also be discussed.
They said there would be a comprehensive review of various segments and progress of government programs including the Kisan credit card and the Emergency Credit Line Guarantee (ECLGS) scheme.
In the budget, the ECLGS has been extended for one year till March 2023. Also, the warranty coverage of the scheme has been extended from Rs 50,000 crore to Rs 5 lakh crore.
The coverage, scope and breadth of benefits of ECLGS 3.0 for the hospitality, travel, tourism and civil aviation sectors have been expanded.
In addition, the credit limit for eligible borrowers has been increased to 50% of their outstanding loan funds, from 40% previously. The enhanced limit is subject to a maximum of Rs 200 crore per borrower.
Also, according to sources, the review of banks’ capital requirements and the financial inclusion drive will be discussed at the meeting.
It should be noted that the meeting takes place in a context where all PSOs posted a profit for the second consecutive year. They more than doubled their net profit to Rs 66,539 crore in FY22. The collective profit of 12 public banks together was Rs 31,820 crore in FY21.
However, there have been collective losses for five consecutive years from 2015-16 to 2019-20.
The highest amount of net loss was recorded in 2017-18 at Rs 85,370 crore, followed by Rs 66,636 crore in 2018-19; Rs 25,941 crore in 2019-20; Rs 17,993 crore in 2015-16 and Rs 11,389 crore in 2016-17.
To improve the financial health of PSBs, the government has implemented a comprehensive 4Rs strategy – transparent recognition of NPAs, resolution and value recovery of troubled accounts, recapitalization of PSBs, and reforms of PSBs and the financial ecosystem at the national level. broad sense – for responsible development and clean system.
Comprehensive measures have been taken as part of the 4Rs strategy to reduce PSB NPAs. As part of the strategy, the government infused Rs 3,10,997 crore to recapitalize banks over the last five fiscal years – from 2016-17 to 2020-21, of which Rs 34,997 crore came from budget allocation and Rs 2, 76,000 crores through the issuance of recapitalization bonds to these banks.
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