Finance Minister Pushes Public Sector Banks for Aggressive Deposit Mobilization

Finance Minister Nirmala Sitharaman held a review meeting with heads of public sector banks, urging them to step up deposit mobilization to sustain credit growth. She emphasized better customer relationships, especially in rural areas, and warned on cyber security. The meeting also covered the implementation of new credit assessment models and government initiatives.

Finance Minister Nirmala Sitharaman on Monday held a performance review meeting with the heads of public sector banks, urging them to make concerted efforts to garner deposits.

Deposits have been lagging behind credit growth by 300-400 basis points in the past few months, leading to an asset-liability mismatch for banks.

Sitharaman emphasized that while credit growth has picked up, deposit mobilization needs further improvement to sustain this growth. She urged banks to conduct special drives to increase deposits.

The Finance Minister also advised public sector banks to foster better customer relationships for efficient service delivery and stressed the importance of connecting with customers in rural and semi-urban areas.

Sitharaman encouraged banks to collaborate and share best practices, particularly in emerging areas, to keep pace with changes in the banking sector.

She acknowledged the banks' efforts to improve asset quality but urged them to optimize the use of resolution and recovery mechanisms offered by the National Company Law Tribunal (NCLT) and National Asset Reconstruction Company Ltd (NARCL).

The meeting also addressed the issues of digital payments and cyber security. Sitharaman called for a collaborative approach involving banks, the government, regulators, and security agencies to mitigate cyber risks.

She stressed the need for periodic reviews of IT systems from a cyber security perspective.

Sitharaman highlighted the government's initiatives to facilitate credit access to lower income citizens and called for the swift implementation of recent Budget announcements, including new credit assessment models for MSMEs.

The minister also instructed banks to expedite credit flow under government schemes like PM Surya Ghar Muft Bijli Yojana and PM Vishwakarma Yojana.

Banks were advised to comply with RBI guidelines on the handover of security documents post-loan closure without any delays.

During the meeting, it was noted that PSBs performed well in FY24, posting improved asset quality, capital adequacy, net interest margins, and record net aggregate profits. These improvements have also bolstered their ability to raise capital from the markets.

Officials from the Department of Financial Services, including DFS Secretary Vivek Joshi and Secretary-Designate M Nagaraju, also attended the meeting.