Sitharaman reviewed the performance of PSBs and asked them to expeditiously implement recent budget announcements, including, a new credit assessment model for MSME (Micro, Small & Medium Enterprises) based on digital footprint and cash flows. Sitharaman, a finance ministry statement said, observed that while credit growth had picked up, mobilisation of deposits could be improved further.
The finance minister was reviewing the performance of PSBs on their financial parameters, deposit mobilisation, digital payments, cyber security framework, and access to credit under financial inclusion.
She had 10 days back told newspersons after addressing the RBI central board meeting that lenders need to focus on raising smaller deposits that come in “trickles” but were the “bread and butter” of the banking system, while flagging concerns over the widening gap between deposits and credit.
RBI governor Shaktikanta Das had highlighted that the low-cost current and savings accounts (CASA) of banks had declined from 43% of total deposits a year ago to 39% in the current fiscal. Das had earlier this month voiced similar sentiments, flagging how alternative investment avenues had become more attractive to retail customers.
“As a result, banks are taking greater recourse to short-term non-retail deposits and other instruments of liability to meet the incremental credit demand,” he said, adding that this may potentially expose the banking system to structural liquidity issues.However, State Bank of India, in its research report on Monday, played down the issue. It said the belief that the deposit growth in the banking sector is flagging is just a statistical myth. On an incremental basis, term deposits accounted for nearly 78% of the total deposits in FY24, though the shares of CASA deposits had declined from its 2023 levels, adding that in FY24, deposits grew by ₹24.3 lakh crore and credit by ₹27.5 lakh crore.Sitharaman also asked the PSBs to explore collaboration to leverage their respective strengths by sharing best practices in emerging areas and equipping themselves to keep pace with changes in the banking sector, the statement said, adding that the minister also urged banks to ensure employees reach out to connect with customers, especially in rural and semi-urban areas, and have better relationships with their customers for efficient customer service delivery.
In the financial performance review of PSBs, it was noted that in FY24, the PSBs performed well across all financial parameters, including improved asset quality with net NPAs (NNPAs) declining to 0.76%, sound capital adequacy of the banks at 15.55%, net interest margin (NIM) at 3.22%, and the highest ever net aggregate profit of ₹1.45 lakh crore with the dividend of ₹27,830 crore to shareholders.
On the issue of cyber security, Sitharaman asked banks to review every aspect of the IT system periodically and thoroughly from the cyber security angle to ensure that the security of the bank systems was not breached or compromised.
