Public sector banks (PSBs) in India will implement a new strategy to enhance their presence in a specific sector, referred to as the “champion sector.” This initiative is part of the Viksit Bharat (developed nation) strategy for PSBs, which aims to strengthen their capabilities and improve their performance. The goal is to develop sector-specific expertise and offer tailored products for segment-specific lending.
“We are discussing these metrics with PSBs as part of their business roadmap till 2026-27,” said one of the officials, who did not wish to be identified.
To achieve this, PSBs plan to identify the champion sector in their business plans and focus on building the necessary capabilities. These capabilities include stress testing, early warning signals, and credit underwriting models to expedite loan approvals. By doing so, they hope to complement the government’s efforts under the Production Linked Incentive scheme, which aims to boost manufacturing capabilities in selected areas.
Collaboration and Non-Traditional Sectors
PSBs are also planning to collaborate with each other to leverage the expertise they develop. They will focus on non-traditional sectors, indicating a shift away from the conventional areas of lending. This move is intended to diversify their portfolios and tap into new growth opportunities.
Enhanced Access and Service Excellence
The Enhanced Access and Service Excellence reform version 7.0 is a comprehensive plan that includes various strategies to strengthen PSBs. These strategies encompass increasing low-cost deposits, raising capital, resolving bad loans, improving cybersecurity, and promoting financial inclusion through outreach programs.
Additionally, PSBs will adopt analytics-driven scorecards for faster loan sanctions, end-to-end automation, and improved risk management. These measures aim to streamline processes and enhance efficiency, ultimately benefiting both existing customers and new clients.
Focus on Medium and Small Businesses
In the current financial year, PSBs are placing a particular focus on improving credit to medium and small businesses. Recognizing the importance of these enterprises for economic growth, PSBs aim to support them by providing easier access to credit and facilitating their expansion plans.
Profitability and Concerns
While most PSBs reported profits for the last quarter of the 2023-24 fiscal year, there are concerns about a decline in credit growth and its potential impact on their profit margins. The rating agency ICRA recently revised its outlook for the Indian banking sector from ‘positive’ to ‘stable,’ citing moderation in credit growth and profitability due to a decline in interest margins.
However, compared to private sector banks, PSBs have performed relatively well in managing slippages, which are loans turning into non-performing assets. This is attributed to a higher proportion of corporate advances in the PSBs’ portfolios, while private sector banks have a greater focus on retail and small business loans.
RISK MANAGEMENT SYSTEM SHOULD BE STRENGTHENED IN EACH AND EVERY BANK TO PREVENT SLIPPAGE OF ANY ACCOUNT IN SMALL AND MEDIUM SECTOR BECOMING NPA.IT IS REVEALED IN RBI OBSERVATION THAT NPA GAPOENS DUE TO DIVERSION OF FUND BY THE BORROWER.THIS HAPPENS DUE TO IMPROPER INSPECTION AND MONITORING OF BORROWAL ACCOUNTS.SPECIAL CELL SHOULD BE SETUP BY FINANCE MINISTRY OF GOVERNMENT OF INDIA TO SIMULTANEOUSLY CARRY OUT INSPECTION AND MONITORING OF BORRIWAL .ACCOUNTS.IF THIS IS DONE BORROWER WILL BE ALERT AND REFRAIN FROM DIVERSION OF FUND..SMALL AND MEDIUM SECTOR GENERATE MAXIMUM EMPLOYMENT OPPORTUNITIES.UNEMOYMENT IS NOW A BURNING QUESTION IN OUR COUNTRY.FINANCING OF SMALL AND MARGINAL SECTOR BY PSBS ARE VERY VERY IMPORTAN TO ACHIEVE DEVELOPMENT OF INDUSTRY AND AGRICULTURE IN OUR COUNTRY.IN ORDER TO ACHIEVE THIS GOAL DIVERSION OF FUND BY BORROWER MUST BE PREVENTED.