Finance Ministry to review credit flow in meeting with PSBs today

Finance Ministry to review credit flow in meeting with PSBs today

The department will also take stock of public sector banks’ asset quality and focus on large bad loans, implementation of the Centre’s various schemes, and the lenders’ plan to raise capital

The Finance Ministry on Tuesday will hold a meeting of chiefs of state-owned banks to review the credit disbursement and broader financial performance of the lenders as the festival season approaches, reported The Financial Express quoting officials.

The Department of Financial Services, which has convened the meeting, will also take stock of public sector banks’ asset quality, focus on large bad loans, implementation of Centre’s various schemes, and the lenders’ plan to raise capital, the FE reported.

Ahead of Diwali last year, the Nirmala Sitharaman-led finance ministry asked state-owned lenders to conduct district-wise credit outreach programmes to bolster loan flow.

In the latest meeting with the public-sector banks (PSBs), the finance ministry will also decide on introducing next-generation reforms in various government schemes, especially those relating to financial inclusion, reported FE.

Even though the credit flow has improved in recent months, there is further scope for PSBs to lend more, as banks’ profitability and asset quality have improved, senior officials believe, FE reported.

The Centre want PSBs to satisfy the increasing credit appetite of the nation’s economy, which is also facing headwinds amid the Russia-Ukraine war.

Credit disbursement in recent months has increased as non-food bank credit jumped 13.7 per cent in June, against 4.9 per cent last year. Meanwhile, credit to industry expanded at a pace of 9.5 per cent in June, against a 0.6 per cent contraction last year.

Banks’ gross non-performing asset (NPA) ratio declined to a six-year low of 5.9 per cent in March this year, against 7.4 per cent last year. Meanwhile, the net bad loan ratio dropped to 1.7 per cent in March from 2.4 per cent last year.

In FY22, the net profit of PSBs jumped 110 per cent YoY to Rs 66,539 crore.

In the meeting, the finance minister can also discuss the progress of credit-linked programmes, such as the Rs 5-trillion Emergency Credit Line Guarantee Scheme, Pradhan Mantri Mudra Yojana, FE reported quoting sources.