The Finance Ministry will review the credit flow in a meeting with PSBs today
The department will also take stock of the asset quality of public sector banks and focus on large bad loans, implementation of the Centre’s various schemes and lenders’ plan to raise capital.
The Finance Ministry will hold a meeting of state bank heads on Tuesday to review credit disbursement and the broader financial performance of lenders as the festival season approaches, The Financial Express reported citing officials.
The Department of Financial Services, which has convened the meeting, will also take stock of the asset quality of public sector banks, focus on large bad loans, the implementation of the Centre’s various schemes and the capital raising plan of the lenders, the FAITH reported
Ahead of Diwali last year, the Nirmala Sitharaman-led finance ministry asked state lenders to conduct credit outreach programs in the district to bolster loan flow.
In the latest meeting with public sector banks (PSBs), the finance ministry will also decide to introduce next-generation reforms in various government schemes, especially those related to financial inclusion, FE reported.
While credit flow has improved in recent months, there is more scope for PSBs to lend more as banks’ profitability and asset quality have improved, senior officials believe, FE reported.
The Center wants PSBs to meet the growing credit appetite of the country’s economy, which is also facing headwinds amid the Russia-Ukraine war.
Credit disbursement in recent months has increased, as non-bank food credit rose 13.7 percent in June, compared to 4.9 percent last year. Meanwhile, credit to industry expanded at a 9.5% pace in June, compared with a 0.6% contraction last year.
Banks’ gross non-performing asset (NPA) ratio declined to a six-year low of 5.9% in March this year, compared to 7.4% last year. Meanwhile, the net NPL ratio fell to 1.7 percent in March from 2.4 percent last year.
In FY22, PSBs’ net profit rose 110 percent year-on-year to Rs 66,539 crore.
In the meeting, the finance minister may also discuss the progress of credit-linked schemes such as the Rs 5 trillion emergency line of credit guarantee scheme, Pradhan Mantri Mudra Yojana, FAITH reported citing sources.
