Finance Minister Nirmala Sitharaman on Friday urged public sector banks (PSBs) to take advantage of Reserve Bank’s 50 basis points rate cut to increase lending toward productive sectors of the economy. Undertaking a review their financial performance, she also called upon these banks to proactively identify emerging commercial growth areas for the next decade, which could aid their profitability and growth.
Stating that the PSBs are well-capitalised with their capital to risk-weighted assets ratio standing at 16.15% as of Mar-2025, the minister called for a strong focus on maintaining robust underwriting and risk management standards. Besides, the banks were also advised to work on ways to garner more low-cost deposits.
Lending to the energy sector, particularly in renewable and sustainable areas,was underscored as a priority to advance India’s green growth agenda. In line with the Budget 2025-26 announcement to develop indigenously designed small modular nuclear reactors (SMR), banks were advised to develop credit models to support this critical sector.
According to sources, the minister directed the PSBs to maintain the FY25 credit growth level or increase it during the current financial year. She also nudged them to strengthen the implementation of the New Credit Assessment Model for MSMEs to broaden their access to capital and expedite credit flow to them.
Cumulative profit of 12 PSBs rose to record Rs 1.78 lakh crore in FY25, registering a growth of 26% over the previous year. The year-on-year increase in profit in absolute terms was about Rs 37,100 crore.
On June 6, the RBI’s six-member monetary policy committee, headed by governor Sanjay Malhotra lowered the benchmark repurchase or repo rate by 50 basis points to 5.5%. It also slashed the cash reserve ratio by 100 basis points to 3% in tranches that will add Rs 2.5 lakh crore to already surplus liquidity in the banking system.
The minister emphasised that banks should also onboard more customers on government’s schemes in a bid to increase financial inclusion. Comprehensive review of various segments and progress in government schemes including Kisan Credit Card, PM Mudra and three social security schemes — Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana and Atal Pension Yojana (APY) were undertaken.
On the asset quality side, the finance minister appreciated the low level of non-performing assets in the banking sector and exuded confidence that the top management will ensure to keep it at that level. In 2024–25, PSBs posted a record net profit of Rs 1.78 lakh crore, indicating continued strengthening of financial performance. Net Non-Performing Assets (NNPAs) declined to a multi-year low of 0.52%.
(With PTI inputs)