Finance Minister Nirmala Sitharaman urged state-owned banks to introduce innovative and appealing deposit schemes during a meeting with the Managing Directors and Chief Executive Officers of public sector banks (PSBs). The goal is to boost deposit mobilization, thereby enabling banks to extend more credit. The minister emphasized the importance of this initiative to address the current imbalance between credit and deposit growth.
Despite some banks raising interest rates, the gap between credit and deposit growth persists at 3-4%. In response to this, some public sector banks, including State Bank of India and Bank of Baroda, have already increased deposit rates to attract funds.
FM acknowledged performance of PSBs
While acknowledging the improved performance of public sector banks, Sitharaman cautioned against bank frauds, highlighting their potential threat to individual customers and financial institutions. She stressed the need for strict administrative action against officials involved in fraud and wilful defaults.
On the financial performance front, PSU banks reported a net profit of approximately Rs 68,500 crore in the first six months of the current financial year. The gross non-performing assets (GNPA) ratio for scheduled commercial banks fell to a decade-low of 3.9% in March 2023 and further to 3.2% in September.
Instructions to Banks
Sitharaman instructed banks to focus on preventing large corporate frauds and wilful defaults. She recommended adopting advanced fraud prevention and detection mechanisms and educating customers about safe banking practices. Regarding wilful defaults, she emphasized the importance of responsible lending practices, enhanced due diligence, regular monitoring of large loan accounts, and swift legal action.
National Asset Reconstruction Company Ltd
The minister also addressed the National Asset Reconstruction Company Ltd’s progress in acquiring stressed accounts, urging improvement and regular meetings between NARCL and banks. She directed banks to undertake consumer education measures to protect against fraud calls, identify fraud accounts promptly, and intensify recovery efforts.
Cybersecurity
Sitharaman reviewed PSBs’ preparedness for cybersecurity risks, stressing the importance of complete customer data privacy. She called for proactive cybersecurity measures, stringent security protocols, and adaptation to the evolving digital landscape. Collaboration and mutual learning among PSBs, coordination with security agencies, regulatory bodies, and technology experts were emphasized to create a resilient financial ecosystem against cybersecurity threats.
The meeting, attended by Minister of State for Finance Bhagwat Kishanrao Karad, Vivek Joshi (Secretary, the Department of Financial Services), and other senior officials, covered a comprehensive range of topics related to the financial sector.
