The Finance Minister of India, Nirmala Sitharaman, convened a performance review meeting with the heads of public sector banks (PSBs) on Monday, emphasizing the need for improvement in deposit growth. Recently, there has been a notable surge in loan disbursement, which has outpaced deposits by 3-4 percent, leading to an imbalance in asset-liability management for the banks.
Key Focus Areas Highlighted by Nirmala Sitharaman
During the meeting, the Finance Minister not only assessed the financial performance of the banks but also reviewed the progress of significant government schemes such as the PM Awas Yojana, PM Surya Jyoti Yojana, and PM Vishwakarma Yojana. Sitharaman placed a keen emphasis on the importance of deposit growth, the credit-deposit (CD) ratio, and the quality of assets.
In her address, she asked the bank leaders to concentrate on their core banking businesses and to innovate by launching new financial products to enhance deposit growth. She pointed out the ongoing imbalance between deposit and loan growth, stating, “The increase in lending has been more pronounced.” Sitharaman highlighted that she would engage with banks on August 19 to discuss the significance of deposit collection.
Advisory on Interest Rates and Deposit Scheme
Sitharaman underscored the flexibility that the Reserve Bank of India (RBI) has granted the banks concerning interest rates, urging them to leverage this freedom to make their deposit schemes more attractive. She stressed the necessity of creating a favorable environment for deposit collection to sustain the financial health of the banking sector.
Discussion on Cybersecurity and Financial Risks
Sources indicated that the meeting also covered pressing concerns regarding cybersecurity and the potential risks within the financial sector. Issues related to fraud and willful defaults were discussed, along with the progress of the National Asset Reconstruction Company Limited (NARCL). This review meeting was significant as it followed the presentation of the Union Budget for 2024-25.
Performance of Public Sector Banks
As of March 2024, the net profit of public sector banks crossed a remarkable ₹1.4 lakh crore, representing an impressive 35 percent increase compared to the previous year. This positive financial trajectory underscores the banks’ resilience amid challenging economic conditions and reflects the effectiveness of government initiatives aimed at bolstering the banking sector.
| Metric | Current Year | Previous Year | Change (%) |
|---|---|---|---|
| Net Profit of PSBs | ₹1.4 lakh crore | ₹1.03 lakh crore | 35% |
| Loan Growth Rate | Higher than Deposits | – | – |
| Deposit Growth Rate | 3-4% slower than loans | – | – |
Conclusion
The meeting between Finance Minister Nirmala Sitharaman and PSB heads marks a critical step towards rectifying the deposit and loan imbalance that has emerged in recent months. By focusing on enhancing deposit collection through innovative strategies and by addressing significant financial risks, the government aims to reinforce the stability and efficiency of the public banking sector.
