Sitharaman urges banks to boost deposits

Finance Minister Nirmala Sitharman on Monday held a performance review meeting with heads of public sector banks and asked them to make concerted efforts to garner deposits.

Deposits have been growing 300-400 basis points lower than the credit growth in the last few months, creating an asset-liability mismatch for banks.

During deliberations on the deposit mobilisation, she said that while the credit growth has picked up, mobilisation of deposits could further be improved to fund the credit growth sustainably, and asked banks to make concerted efforts to garner deposits by conducting special drives.

Sitharaman also advised public sector banks (PSBs) to have better relationships with their customers for efficient customer service delivery, an official statement said.

She asked banks to ensure that employees reach out to connect with their customers, especially in rural and semi-urban areas.

The minister also urged the PSBs to explore collaboration to leverage their respective strengths by sharing best practices in emerging areas and equip themselves to keep pace with changes in the banking sector.

While acknowledging the efforts made by the banks to improve the asset quality, the minister suggested optimising the scope of resolution and recovery offered by the National Company Law Tribunal (NCLT) and National Asset Reconstruction Company Ltd (NARCL).

According to the statement, the issues related to digital payments and cyber security framework were also deliberated in the meeting.

Observing that the issues of cyber security should be seen from a systemic perspective, she emphasised the need for a collaborative approach between banks, the government, regulators and security agencies for mitigating cyber risks.

She urged that every aspect of the IT system should be reviewed periodically and thoroughly from the cyber security angle to ensure that the security of the bank systems is not breached or compromised.

Sitharaman noted that the government, through various schemes, has always endeavoured to facilitate credit access to citizens at the bottom of the pyramid to support their livelihood and improve lives.

She further asked the banks to expeditiously implement the recent Budget announcements, including a new credit assessment model for MSMEs based on digital footprints and cash flows.

Banks were also instructed by the minister to focus on further increasing credit flow to eligible beneficiaries under various government initiatives like PM Surya Ghar Muft Bijli Yojana and PM Vishwakarma Yojana, the statement said.

The minister advised the banks to ensure compliance with the Reserve Bank of India's guidelines on the handover of security documents after the closure of the loans and directed that there should not be any delay in handing over the documents to the customer.

During the meeting, it was noted that during FY24, the PSBs performed well across all financial parameters as evidenced by improved asset quality with net NPAs (NNPAs) declining to 0.76 per cent, capital adequacy at 15.55 per cent, net interest margin (NIM) at 3.22 per cent, and highest-ever net aggregate profit of Rs 1.45 lakh crore with the dividend of Rs 27,830 crore to the shareholders.

Improvements over various parameters have also enhanced the ability of PSBs to raise capital from the markets, the statement said.

The meeting was also attended by DFS Secretary Vivek Joshi and M Nagaraju, Secretary-Designate besides senior officials of the Department of Financial Services (DFS).