On August 25, Finance Minister Nirmala Sitharaman will meet with heads of public sector banks (PSBs) to assess the institutions’ financial performance and efforts to support the economy devastated by the COVID-19 epidemic.
The insiders state that the meeting with the MDs and CEOs of PSBs is crucial as there is high importance given to the banking sectors in creating demand and creating a boost in the consumption
The finance minister has stated that the government is prepared to do all it takes to recover and promote economic growth that has been harmed by the COVID-19 epidemic.
“Growth will be given its importance. Growth will be pushed both by the Reserve Bank and by us…,” she’d stated.
This would be the first physical assessment meeting since the pandemics start in March of last year.
The conference is anticipated to take stock of the banking industry and progress on the Reserve Bank of India’s (RBI) restructuring 2.0 program, according to sources, who added that banks may be urged to push the loan growth in productive sectors.
According to reports, the revised Rs 4.5 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) would also be discussed during the meeting, which is set to take place in Mumbai.
Furthermore, the Finance Minister is likely to assess the bad loan or non-performing asset (NPA) status and debate various bank recovery methods, according to sources.
NPAs have been now reduced to Rs 7,39,541 crore on March 31, 2019, Rs 6,78,317 crore on March 31, 2020, and Rs 6,16,616 crore on March 31, 2021, as a consequence of the government’s strategy of recognition, resolution, recapitalization, and reforms (provisional data).
At the same time, thorough efforts were taken to manage and recover NPAs, allowing PSBs to collect Rs 5,01,479 crore during the previous six fiscal years, the government recently informed Parliament.
Credit growth at scheduled commercial banks (SCBs) has remained positive until 2020-21, despite a 7.3% reduction in GDP owing to the COVID-19 pandemic.
Despite the economic disruptions created by the pandemic, PSBs raised a record Rs 58,700 crore from markets in 2020-21 using a mix of loan and equity to strengthen their capital base. As a consequence, the capital-to-risk-weighted-assets ratio increased to 14.04 percent as of March 31, 2021, compared to the legal threshold of 10.875 percent, allowing PSBs to raise lending even more.
As a result, despite a 7.3% contraction in the GDP in 2020-21, PSBs made a profit of Rs 31,816 crore, the largest in five years.
The closure of their historical bad loan crisis was the major cause for PSBs’ Rs 57,832-crore turnaround from a deficit of Rs 26,015 crore in 2019-20 to a combined profit of Rs 31,816 crore.