Finance minister Nirmala Sitharaman on Thursday asked public sector banks (PSBs) to ensure an increase in rural, agriculture and sectoral credit to meet the Priority Sector Lending (PSL) norms and transparent recognition of non-performing assets (NPAs) as per the extant guidelines of the regulator.
In the review performance of PSBs here, Sitharaman noted that while the overall PSL have exceeded the mandated target, the PSL targets in the sub-categories should also be met, particularly the small and marginal farmers, and the micro-enterprises.
Under the PSL rules, a banking entity needs to lend 40% of the adjusted net bank credit to the so-called priority sector or economically weaker sections such as agriculture, micro-enterprises and other economically disadvantaged sections.
During the meeting attended by the chief of PSBs, it was noted that major financial parameters viz., credit deployment, profitability, asset quality, capital adequacy etc. indicate that performance of PSBs significantly improved.
The asset quality of PSBs has improved significantly with gross NPAs at 4.97% and net NPAs at 1.24% in March 2023. During FY 2022-23, PSBs earned a record aggregate net profit of around Rs 1.05 trillion, almost triple from net profits earned in 2013-14, the ministry said in a statement.
“Strengthened by high Capital to Risk Assets Ratio (CRAR) of 15.53% (comparable to major economies of the world), clean balance sheets supported by a healthy provision coverage (90.68%), and improved resilience, PSBs are well positioned to support the credit needs of the productive sectors of the growing economy,” the ministry said.
Bankers were also confident of withstanding macroeconomic shocks due to strong financial health of PSBs.
The minister asked the PSBs to ensure that there is a fair and transparent recognition of NPAs as per the extant guidelines of the regulator. Banks should periodically review it internally to ensure proper recognition and reporting of the stressed assets.
She also asked the PSBs to meet the targets for the credit to street vendors under PMSVANidhi and the momentum of disbursals gained under PMSVANidhi should be sustained.
The Minister said that she will also chair meetings in the month of July-August in different regions of the country to review the functioning of the Regional Rural Banks (RRBs) along with their sponsor banks, with a special focus on the status of technological upgradation of the RRBs.
She asked the sponsor banks of the RRBs to ensure a time-bound technological upgradation of the RRBs and continuously monitor their functioning to make them more efficient and effective, which will immensely benefit the people living in rural areas.