Finance and Corporate Affairs Minister Nirmala Sitharaman will review the performance of Public Sector Banks (PSBs) on August 19. This will be the first review meeting after Sitharaman presented the Modi 3.0 government’s first budget on July 23.
The review meeting, which would be held in the capital, is expected to cover the performance of PSBs for the entire fiscal year 2023-24 and first quarter ended June 30 this fiscal, sources said.
It comes at a time when India’s banking sector has shown remarkable resilience and PSBs showed a stellar performance in 2023-24, despite deposit challenges.
Quality control
The review will happen amidst ongoing improvements in asset quality, enhanced provisioning for bad loans, sustained capital adequacy and a rise in profitability.
Total combined net profit of the 12 PSBs touched ₹1,41,203 crore in 2023-24, reflecting a 35 per cent growth from the ₹1,04,649 crore in 2022-23. The growth tempo in PSB profitability has been maintained in first quarter this fiscal as well despite continued deposit challenges.
Credit growth remains robust, mainly driven by lending to services and personal loans. Credit disbursal by Scheduled Commercial Banks (SCBs) stood at ₹ 164.3 lakh crore, growing 20.2 per cent at the end of March 2024, compared to 15 per cent growth during the same period last year. The trend is continuing in FY25, as reflected in a 19 per cent and a 19.8 per cent year-on-year growth in bank credit in April 2024 and May 2024 respectively.
There has been a significant enhancement in the asset quality of banks, led by improved borrower selection, more effective debt recovery and heightened debt awareness among large borrowers.
Reducing NPAs
The gross non performing assets (GNPA) ratio of SCBs continued its downward trend, reaching to a 12-year low of 2.8 per cent at the end of March 2024 from its peak of 11.2 percent in FY18. The improvement in SCBs asset quality has been broad-based.
The previous occasion Sitharaman had taken a review meeting of performance of PSBs was on December 30 last year. At that meeting, she had advised the National Asset Reconstruction Company Ltd (NARCL) and PSBs to closely coordinate to expedite on-boarding of stressed accounts.
Sitharaman had also asked PSBs to concentrate on fraud prevention activities concerned with both large corporate frauds and wilful defaults.
She had then directed PSBs to undertake consumer education measures for protection from frauds and adopt proactive cybersecurity measures and implement stringent security protocols to ensure integrity of domestic financial systems remains uncompromised.
The Finance Minister had then called for coordination between banks, security agencies, regulatory bodies and technology experts to create a more resilient financial ecosystem against potential cyber-security threats.