New Delhi: Finance Minister Nirmala Sitharman on Monday held a performance review meeting with heads of public sector banks and urged them to improve their deposit growth.
Deposits have been growing 300-400 basis points lower than the credit growth in the last few months, creating an asset-liability mismatch for banks.
According to sources, 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.
Sitharman also took stock of deposit growth, credit-to-deposit ratio (CD ratio) and asset quality, sources said.
The minister asked the banks’ chief to focus on core banking business and increase the pace of deposit growth by introducing innovative products.
Earlier this month, the finance minister had said there is a mismatch between deposit and lending growth.
“Growth in lending is higher…I will be meeting banks (on August 19) for various reasons and in that process, I will be talking to them about the importance of deposit collection,” she had said.
The RBI has given them liberty in terms of interest rate, she had said, adding that using that liberty, 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.
During the meeting, concerns related to cyber security and the risks to the financial sector were also discussed, sources said.
Issues related to fraud and wilful defaulters and progress on the National Asset Reconstruction Company Ltd (NARCL) also came up for discussion, they added.
This is the first review meeting after the presentation of Budget 2024-25.
On the performance front, 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 Public Sector Banks (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 earned a profit of Rs 61,077 crore 22 per cent higher than the previous financial year (Rs 50,232 crore).
