The Treasury Department has asked public sector banks to explore fintech partnerships and co-loan opportunities to expand their operations. The sources said banks were asked to expedite the resolution of non-performing assets (NPAs) and focus on recovering bad loans. The Treasury Department’s recently completed performance assessment of PSBs, sources said, asked lenders to focus on technology and data analytics to boost their lending. The ministry also urged heads of public sector lenders to strengthen IT security systems and cybersecurity to fight fraud.
According to the sources, banks were asked to sanction loans for productive sectors to accelerate the economy’s recovery, which has faced headwinds, including the war between Russia and Ukraine. According to the latest data from the RBI, PSB lending growth improved significantly to 7.8% in March 2022, compared to 3.6% a year ago. Some of the PSBs recorded a growth of 26%. Bank of Maharashtra (BoM) registered a 26% increase in gross advances to ₹1,35,240 crore at the end of March 2022. It was followed by the State Bank of India and Union Bank of India at 10.27% and 9.66% ,respectively
The BoM headquartered in Pune witnessed a deposit growth of 16.26% and mobilized ₹2,02,294 crore at the end of March 2022. Union Bank of India was second with 11.99% growth in deposits (₹10,32,102 crore), while Indian Bank recorded a 10% increase to 5,84,661 crore. The sources said banks were asked to expedite the resolution of non-performing assets (NPAs) and focus on recovering bad loans. The sources said the meeting took stock of banks’ asset quality and business growth plans, adding that ₹100 crore non-performing assets (NPAs) and recovery status were also discussed.
It should be noted that the meeting took place against the background of all PSBs making profits for the second consecutive financial year. They more than doubled their net profit to ₹66,539 crore in FY22. The collective profit of 12 state-owned banks together was ₹31,820 crore in FY21. However, there were collective losses for five consecutive years, from 2015-16 to 2019-20. The highest net loss was recorded in 2017-18 at ₹85,370 crore, followed by ₹66,636 crore in 2018-19; ₹25,941 crore in 2019-20, 17,993 crore in 2015-16 and ₹11,389 crores in 2016-17.
To improve the financial health of PSBs, the government has implemented a comprehensive 4R strategy – transparent recognition of NPAs, resolution, recovery of the value of stressed accounts, recapitalization of PSB, an d reforms in PSBs and the wider financial ecosystem – for a reliable and clean system . Extensive measures have been taken under the 4R strategy to reduce the NPAs of PSBs. As part of the strategy, the government has injected ₹3,10,997 crore to recapitalize banks over the last five fiscal years – from 2016-17 to 2020-21, of which ₹34,997 crore came from budget allocation and ₹2,76,000 crore from the issuance of recapitalization bonds to these banks.
