Finance Minister Nirmala Sitharaman on Monday asked state-owned banks to make concerted efforts to garner deposits by conducting special drives. She also advised public sector banks (PSBs) to have better relationships with their customers for efficient customer service delivery.
Sitharaman said this during the meeting with the heads of PSBs on Monday, to review their performance. The meeting comes over a week after she asked banks to focus their core function of deposits and lending.
“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,” the finance minister said during the meeting with PSU banks.
Sitharaman also urged banks to ensure that employees reach out to connect with their customers, especially in rural and semi-urban areas. She also urged the PSBs to explore collaboration to leverage the respective strengths by sharing best practices in emerging areas and equip themselves to keep pace with changes in banking sector.
While acknowledging the efforts made by the banks to improve the asset quality, Smt. Sitharaman advised them to optimise the scope of resolution and recovery offered by NCLT and NARCL.
“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%, sound capital adequacy of the banks at 15.55%, Net Interest Margin (NIM) of the banks at 3.22%, 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,” according to an official statement on Monday.
The issues related to digital payments and cyber security framework were also deliberated in the meeting. The Union Finance Minister advised that issues of cyber security should be seen from a systemic perspective and emphasised that a collaborative approach between banks, Government, regulators and security agencies is needed to put in place necessary mitigants against cyber-risks.
Union Finance Minister Nirmala Sitharaman chaired the meeting to review performance of public sector banks PSBs on various parameters, in New Delhi, on August 19. The meeting was also being attended by Vivek Joshi, secretary of the department of financial services, along with incoming secretary M Nagaraju; and MDs & CEOs of PSBs, besides senior officials of the department of financial services.
On August 10, in a joint press conference with RBI governor Shaktikanta Das after the central bank’s board meeting, Sitharaman asked banks to focus on core banking activity of deposits and lending.
She said deposits and lending are the two wheels of a cart and “deposit is moving slowly”. The banks, she stressed, need to focus on core banking business which is mobilising deposits and lending to those who need funds.
In order to overcome the mismatch between deposits and lending, Sitharaman asked banks to come up with “innovative and attractive” deposit schemes to mobilise funds from the people.
RBI Governor Shaktikanta Das had said that interest rates are deregulated and often banks raise deposit rates to attract funds. “Banks are free to decide on interest rates,” Das added.
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