FM Nirmala Sitharaman to meet heads of PSBs on Monday; may urge them for credit growth

Finance Minister Nirmala Sitharaman is scheduled 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 schemes launched by the government for the revival of the economy.

Banks would be urged to sanction loans for productive sectors to accelerate the revival of the economy facing headwinds including from the Russia-Ukraine war, sources said.

Last week during the Iconic Week celebration of the finance ministry, banks conducted outreach programs across the country where eligible borrowers have sanctioned loans on the spot.

The Finance Minister would take stock of credit growth, asset quality, and business growth plan of banks, sources said, adding non-performing assets (NPAs) of Rs 100 crore and the recovery status would also be discussed.

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They said there would be a comprehensive review of various segments and progress in government schemes including the Kisan Credit Card, and Emergency Credit Line Guarantee Scheme (ECLGS).

In the Budget, ECLGS was extended by a year till March 2023. Further, the guarantee cover for the scheme was expanded by Rs 50,000 crore to Rs 5 lakh crore.

The coverage, scope, and extent of benefits under ECLGS 3.0 for hospitality, travel, tourism, and civil aviation sectors were expanded.

Also, the credit limit for eligible borrowers was increased to 50 per cent of their fund-based credit outstanding from 40 per cent earlier. The enhanced limit is subject to a maximum of Rs 200 crore per borrower.

Besides, sources said, the review of capital requirements of banks and the financial inclusion drive would be reviewed during the meeting.

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It is to be noted that the meeting is being held against the backdrop when all PSBs posted a profit in the second financial year in a row. They have more than doubled their net profit to Rs 66,539 crore in FY'22. The collective profit of 12 state-owned banks together was Rs 31,820 crore in FY21.

However, there were collective losses for five straight years during 2015-16 to 2019-20.

The highest amount of net loss was registered 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 implemented a comprehensive 4Rs strategy -- recognition of NPAs transparently, resolution and recovery of value from stressed accounts, recapitalisation of PSBs, and reforms in PSBs and the wider financial ecosystem -- for a responsible and clean system.

Comprehensive steps were taken under the 4Rs strategy to reduce NPAs of PSBs. As part of the strategy, the government has infused Rs 3,10,997 crore to recapitalise banks during the last five financial years -- from 2016-17 to 2020-21, out of which Rs 34,997 crore were sourced through budgetary allocation and Rs 2,76,000 crore through issuance of recapitalisation bonds to these banks.