New Delhi: Finance Minister Nirmala Sitharaman on Friday asked public sector banks (PSBs) to deepen corporate lending in productive sectors while ensuring robust underwriting and risk management standards.
The finance minister’s direction comes weeks after the RBI’s six-member monetary policy committee, headed by Governor Sanjay Malhotra, lowered the benchmark repurchase or repo rate by a massive 50 basis points to 5.5 per cent.
It also slashed the cash reserve ratio by 100 basis points to 3 per cent in tranches that will add Rs 2.5 lakh crore to already surplus liquidity in the banking system.
While chairing a high-level meeting to review the performance of PSBs across key areas, including financial parameters, credit offtake, financial inclusion, customer service, and cyber security, she underlined the need for sustained efforts to improve deposit mobilisation to support ongoing credit growth.
State-owned banks were advised to undertake special drives, make effective use of their branch networks, and deepen outreach in semi-urban and rural areas, the finance ministry said in a statement.
During the review meeting attended by heads of banks, she urged PSBs to proactively identify emerging commercial growth areas for the next decade, which can aid profitability and growth for them.
Deepening corporate lending in productive sectors was also emphasised, with a strong focus on maintaining robust underwriting and risk management standards, it said.
Lending to the energy sector, particularly in renewable and sustainable areas, was underscored as a national priority to advance India’s green growth agenda, it said.
In line with the Budget 2025-26 announcement to develop indigenously designed small modular nuclear reactors (SMR), it said, banks were asked to develop credit models to support this critical sector.
Banks were further advised to expand their presence in GIFT City to support India’s aspirations in international financial services, tap into emerging global opportunities, and increase participation in the India International Bullion Exchange (IIBX).
“Enhancing customer experience remains a key priority, and banks were directed by the Finance Minister to ensure faster grievance redressal, offer simplified digital platforms, and provide multilingual services both online and offline. Maintaining clean, customer-friendly physical branches and expanding in metro and urban centres to keep pace with urbanisation was also highlighted,” it said.
Sitharaman directed the PSBs to participate actively in the upcoming 3-month Financial Inclusion saturation campaign, beginning July 1, 2025, covering 2.7 lakh Gram Panchayats and Urban Local Bodies.
This campaign would also focus on assisting the citizens with respect to KYC, re-KYC & unclaimed deposits, it said, adding, banks were directed to ensure focused outreach, adequate manpower deployment, and effective publicity of this special campaign to further deepen financial inclusion under schemes such as PM Jan Dhan Yojana, PM Jeevan Jyoti Bima, PM Suraksha Bima Yojana, etc.
Banks were instructed to scale up efforts under key financial inclusion schemes, including PM MUDRA Yojana, PM Vishwakarma, PM Surya Ghar Muft Bijli Yojana, PM Vidyalaxmi, and the Kisan Credit Card (KCC) scheme.
Underlining the importance of adequate staffing, she asked banks that existing and arising vacancies must be filled as soon as possible to deliver better service.
Banks were encouraged to scale up branch expansion in underserved areas like the north-east, it said.
She underlined the need to strengthen the Business Correspondent (BC) network to ensure last-mile access to banking services, particularly in rural and remote areas.
Sitharaman also reviewed the progress under the New Credit Assessment Model for MSMEs, launched on March 6, 2025, with 1.97 lakh MSME loans already sanctioned, amounting to Rs 60,000 crore.
Banks were directed to strengthen the implementation of the New Credit Assessment Model for MSMEs to broaden access to capital and expedite credit flow to small & medium businesses, it said.
It was noted during the meeting that under the Stand Up India scheme, 2.28 lakh loans have been sanctioned worth Rs 51,192 crore.
Similarly, under the PM Vidya Lakshmi scheme, 6,682 applications have been sanctioned, amounting to Rs 1,751 crore. Given the government’s commitment to supporting entrepreneurship and higher education through targeted credit initiatives, banks were directed by the minister to give greater focus to these schemes.
It was noted during the meeting that from 2022-23 to 2024-25, the total business of banks rose from Rs 203 lakh crore to Rs 251 lakh crore. During the same period, net NPAs of the PSBs declined sharply from 1.24 per cent to 0.52 per cent.
Net profit increased from Rs 1.04 lakh crore to Rs 1.78 lakh crore, and dividend payouts grew from Rs 20,964 crore to Rs 34,990 crore.
The finance minister was also apprised that the PSBs are adequately capitalised, with their CRAR standing at 16.15 per cent as of March, 2025.
The meeting was attended by Minister of State for Finance Pankaj Chaudhary; Secretary, Department of Financial Services (DFS), M Nagaraju; MDs of PSBs; and senior officials of the DFS.
