Ministry of Finance: Excerpts
Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman reviewed the performance of the Public Sector Banks (PSBs) with their Chief Executives in Mumbai today.
The review noted that the Government’s 4R strategy of Recognition, Resolution, Recapitalization and Reform as a response to the situation prevailing in 2014 had led to dramatic improvements at PSBs in 2020-21 on various parameters of profitability, capital adequacy, NPA reduction, checks on occurrence of fraud and mobilisation of funds from the market.
Impact of 4R approach – Snapshot of Public Sector Banks in 2020-21
• Net profits of Rs. 31,820 crorehighest in five years
• Gross NPAs at 9.1% (14.58% – March 2018)
• Net NPA at 3.1% (7.97% – March 2018)
• Provision Coverage Ratio at 84% (62.7% – March 2018)
• 14.04% Capital Adequacy (Prescribed minimum – 10.875%)
• Rs. 58,697 croreraised as debt and equity, of which Rs. 10,543 crore as
As part of the interaction with MDs of PSBs, the Finance Minister highlighted the need for a sharper focus on customer service, credit growth to support MSMEs and underserved segments, as well as credit for national initiatives for infrastructure, PLI scheme and exports.
Regarding credit outreach, the Finance Minister said that between October 2019 and March 2021, banks had conducted an outreach programme and had distributed Rs 4.94 lakh crore of loans, and exhorted public sector banks to conduct a similar exercise this year as well.
The outperformance of PSBs has continued in the April – June quarter 2021 as well. Overall profits in this quarter have been at Rs 14,012 crore and operational profits, fee income as well as treasury income has continued to see robust growth.
This performance by PSBs is despite wide-spread disruptions caused by COVID-19 pandemic. Faith of markets in PSBs has become stronger with over Rs. 7,800 crore being raised as equity in the first five months of this year, as against Rs. 10,543 crore in all of last year.
Amalgamations have happened and the benefits are coming through in terms of greater efficiency, more professionalism, lower cost and stronger capital buffers.
At PSBs, the improvement in customer service and reach of PSBs has been enabled by adoption of digital banking, digital lending, feature-rich Mobile and Internet banking, more customer-friendly features and regional language customer-interface.
Digital retail loan request initiation through digital channels has been enabled in larger PSBs, with retail disbursements from loan requests so initiated in the FY2020-21 amounting to Rs. 40,819 crore.
Customer-need-driven, analytics-based credit offers have been given an impetus, resulting in Rs. 49,777 crore of fresh retail loan disbursements by the seven larger PSBs in FY2020-21.
As a result, nearly 72% of financial transactions of PSBs are now done through digital channels, with doubling of customers active on digital channels from 3.4 crore in FY2019-20 to 7.6 crore in FY2020-21.
During the pandemic, PSBs, private banks and NBFCs supported over 1.16 crore borrowers through the Emergency Credit Line Guarantee Scheme (ECLGS) alone.
The success of ECLGS led to the Government increasing the ECLGS to Rs. 4.5 lakh crore as part of the announcements made on June 28, 2021.
Alongside, there have been other initiatives such as the Guarantee Scheme for MFIs and for Capital Expenditure (CAPEX) in the health sector. The MFI scheme, for instance, has already sanctioned almost Rs. 1,000 crore just last week, the “Ubharte Sitare Scheme” was launched for identifying potential Mid sized and Small companies as our new champions in exports.
At the PSBs review, the Finance Minister also launched the Enhanced Access and Service Excellence (EASE) 4.0 Reforms Agenda for FY2021-22 and released the Annual Report for EASE 3.0 (FY2020-21).