Finance Minister Nirmala is scheduled to meet heads of public sector banks (PSBs) on August 25 to reviewfinancial performance of the lenders and progress made by them tosupport the economy battered by COVID-19 pandemic.
Given the importance of the banking sector in generating demandand boosting consumption, sources said the meeting with the MD andCEOs of PSBs is considered important.
Recently, the Finance Minister said the government is ready todo everything required to revive and support economic growth hitby the COVID-19 pandemic.
"Growth will be given its importance. Growth will be pushed bothby the Reserve Bank and by us...," she had said.
Interestingly, this would be the first physical review meetingsince the outbreak of the pandemic in March last year.
The meeting is expected to take stock of the banking sector, progresson restructuring 2.0 scheme announced by Reserve Bank of India (RBI),sources said, adding that banks may be nudged to push loan growthin productive sectors.
The revamped Rs 4.5 lakh crore Emergency Credit Line GuaranteeScheme (ECLGS) would also be reviewed during the meeting likely tobe held in Mumbai, sources said.
Besides, the Finance Minister expected to take a stock of the badloan or non-performing asset (NPA) situation, and discuss variousrecovery measures by banks, they said.
As a result of government's strategy of recognition, resolution,recapitalisation and reforms, NPAs have since declined to Rs 7,39,541crore on March 31, 2019, Rs 6,78,317 crore on March 31, 2020 andfurther to Rs 6,16,616 crore as on March 31, 2021 (provisional data).
At the same time comprehensive steps were taken to control andto effect recovery in NPAs, which enabled PSBs to recover Rs 5,01,479crore over the last six financial years, the government informedParliament recently.
As far as credit growth of scheduled commercial banks (SCBs) isconcerned, it has remained positive for 2020-21 despite contractionin GDP (-7.3 per cent) due to the COVID-19 pandemic.
Gross loans and advances - outstanding of SCBs increased from Rs109.19 lakh crore as of March 31, 2020 to Rs 113.99 lakh crore asof March 31, 2021. Agriculture and allied activities, micro, smalland medium enterprises, housing and auto have witnessed a year-on-yeargrowth of 12.3 per cent, 8.5 per cent, 9.1 per cent and 9.5 per cent,respectively, during the year.
Notwithstanding economic disruptions caused by the pandemic, PSBshave managed to raise a record Rs 58,700 crore from markets in 2020-21through a mix of debt and equity to enhance capital base. As a resultcapital to risk weighted assets ratio rose to 14.04 per cent as ofMarch 31, 2021, as against regulatory requirement of 10.875 per centboosting the ability of PSBs to further increase lending.