
Public sector banks (PSBs) in India are gearing up to enhance their services and compete in the banking sector. Their strategies include focusing on specific customer segments such as women, youth, and micro, small, and medium enterprises (MSMEs). Additionally, they aim to attract low-cost deposits from Trusts, Associations, autonomous bodies, Societies, and Clubs (TASCs) and introduce reward and motivation programs for their employees. These initiatives are part of the PSB EASE 7.0 agenda for the fiscal year 2025, which is a joint effort of the Department of Financial Services, Ministry of Finance, and PSBs under the Indian Banks’ Association.
Background and Motivation
PSBs have witnessed a decrease in their share of total credit, dropping to 58% as of December 2023 from 63.7% in March 2020. In contrast, private sector banks have seen their share rise to 42% during the same period. To combat this trend, PSBs are aiming to expand their reach and provide banking solutions to beneficiaries of government programs focused on women. They also plan to launch financial products specifically designed for women, such as savings accounts and loan schemes tailored to sectors dominated by women entrepreneurs.
Focus on Women, Youth, and MSMEs
PSBs intend to increase their penetration in providing banking services to women by accelerating the lending portfolio for Self Help Groups (SHGs) and Micro Finance. They will also offer a wider range of banking products to individual members of these groups, enabling grade improvement for SHGs. Furthermore, PSBs will target young customers and design products that suit their evolving needs. This may include credit cards with lifestyle benefits and salary accounts with varying advantages.
Strengthening MSME Relationships
PSBs aim to strengthen their customer base among micro, small, and medium enterprises (MSMEs) by acquiring new customers and deepening relationships with existing ones. They plan to introduce loan programs tailored for new business ventures, such as start-up incubation loans and cash-flow-based loans. Additionally, PSBs will enhance underwriting and deploy analytics-driven scorecards for MSME digital lending journeys to automate processes and improve risk management.
Focus on CASA Customers and Digitization
Given the decline in Current Account and Savings Account (CASA) deposits across the banking system, PSBs will actively pursue new retail and TASC CASA customers through customized offerings and digitized processes. They aim to grow and establish CASA accounts as primary banking relationships. PSBs will also work on improving the availability and performance of self-service channels like ATMs, mobile banking, internet banking, and chatbots. Moreover, they plan to increase service availability at non-home branches and implement omni-channel processes to reduce the need for branch visits.
Strengthening Linkages and Partnerships
PSBs intend to deepen their linkages and partnerships with various entities such as Self Help Groups (SHGs), joint liability groups, primary agriculture co-operatives, original equipment manufacturers, farmer producer organizations, and technology and retail platforms. They aim to diversify their agri-lending portfolio beyond small-value Kisan Credit Cards (KCC) and focus on allied agriculture, agri-processing, agri-infrastructure, agri-exports, agri-equipment, and agri value chain-related businesses. Furthermore, PSBs will design specialized products for segment-specific small-ticket lending to cater to immediate financial needs.
Employee Rewards and Service Improvements
To encourage customer-friendly behavior, PSBs will design, implement, and track reward and motivation programs for their employees. They aim to create an employee rewards pool to recognize and incentivize excellent customer service. Additionally, PSBs will prioritize the continuous availability, reliability, responsiveness, and performance of self-service channels such as ATMs, mobile banking, internet banking, and chatbots.
Conclusion
PSBs in India are proactively taking steps to enhance their competitiveness and improve their services. By focusing on women, youth, and MSME customers, expanding their customer base, strengthening partnerships, and leveraging digitization, PSBs aim to regain their market share and provide better banking experiences to their customers.