FM Asks PSBs to Focus on Core Business, Deposits

New Delhi: Union finance minister Nirmala Sitharaman on Monday asked all the heads of public sector banks (PSBs) to focus on core banking business and speed up the pace of deposit growth by introducing innovative products. Sitharman is also expected to meet them again in the near future to further review the overall performance of banks, a top source said after the finance minister’s meeting with the PSB chiefs in the capital.

“The finance minister reviewed the financial performance of banks and progress made in the implementation of various flagship schemes of the government, including PM Awas Yojana, PM Surya Ghar and PM Vishwakarma Yojana among others. Besides, she also took stock of deposit growth, credit-to-deposit ratio, asset quality, customers' safety and security and other growth-related issues involved in the system,” the source said.

During the meeting, the source further said that customers' concerns related to cyber security and the risks to the financial sector were also discussed. “Issues related to fraud and wilful defaulters and progress on the National Asset Reconstruction Company Ltd (NARCL) also came up for the discussion,” the source added.

As the deposits are learnt to have grown upto 400 basis points lower than the credit growth in the last few months, creating an asset-liability mismatch for banks, the minister also urged the banks’ chief to focus on core banking business and increase the pace of deposit growth by introducing customer-friendly new products in their respective banks. Earlier this month, the finance minister had said that there is a mismatch between deposit and lending growth.

She had said the RBI has given them liberty in terms of interest rate where banks should make deposits more attractive. Echoing a similar view, RBI governor Shaktikanta Das had asked banks to mobilise deposits through innovative products and services by leveraging their vast branch network.

“Banks are taking greater recourse to short-term non-retail deposits and other instruments of liability to meet the incremental credit demand. This, as I emphasised elsewhere, may potentially expose the banking system to structural liquidity issues,” he had said.

This is the first review meeting after the presentation of Budget 2024-25. On the performance front, the PSU banks’ net profit has crossed Rs 1.4 lakh crore in the financial year ended March 2024, recording a growth of 35 per cent over the previous year on a high base of Rs 1 lakh crore.

The 12 PSBs together had earned a net profit of Rs Rs 1,04,649 crore in 2022-23. Out of the total profit of Rs 141,203 crore earned during the FY24, market leader State Bank of India (SBI) alone contributed over 40 per cent of the total earnings, as per the published numbers on exchanges. SBI also earned a profit of Rs 61,077 crore 22 per cent higher than the previous financial year of Rs 50,232 crore.