Finance Ministry asks banks to sanction loans to fintech, other sectors that can revive the economy

The Ministry of Finance has asked public sector banks to sanction lending to productive sectors in a bid to speed up the recovery of the economy in the face of headwinds. Public sector banks were invited to explore fintech partnerships and co-lending opportunities to grow their businesses.

According to sources, the finance ministry has asked banks to sanction lending to productive sectors working to revive the economy facing headwinds due to global tensions related to the ongoing Russian-Ukrainian war.

Furthermore, the sources noted that in the PSO performance review recently concluded by the Ministry of Finance, lenders were urged to focus on technology and data analytics to push their lending. The ministry has urged heads of public sector lenders to strengthen IT security systems and cybersecurity to control fraud.

According to the latest data from the RBI, loan growth of PSOs has improved significantly from 3.6% a year ago to 7.8% in March 2022. Some of the PSOs recorded growth of 26% . The Bank of Maharashtra (BoM) recorded a 26% increase in gross advances to 1,35,240 crore at the end of March 2022. It was followed by State Bank of India and Union Bank of India with growth of 10.27% and 9.66%, respectively.

BoM, headquartered in Pune, recorded deposit growth of 16.26% and mobilized 2,02,294 crore at the end of March 2022. Union Bank of India was second with 11.99% growth in deposits ( 10,32,102 crore), while Indian Bank recorded a rise of 10% to 5,84,661 crore.

The sources said banks have been told to speed up the resolution of non-performing assets (NPAs) and focus on recovering bad debts. The meeting took stock of the banks’ asset quality and business growth plans, the sources said, adding that the non-performing assets (NPA) of 100 crores and recovery status were also discussed.

It should be noted that the meeting took place in a context where all PSOs posted a profit for the second consecutive year. They more than doubled their net profit for 66,539 crores in FY22. The collective profit of 12 public banks combined was 31,820 crore in FY21.

However, there have been collective losses for five consecutive years from 2015-16 to 2019-20. The highest amount of net loss was recorded in 2017-2018 at 85,370 crore, followed by 66,636 crores in 2018-19; 25,941 crores in 2019-2020; 17,993 crore in 2015-16 and 11,389 crore in 2016-17.

To improve the financial health of PSBs, the government has implemented a comprehensive 4Rs strategy – transparent recognition of NPAs, resolution and value recovery of troubled accounts, recapitalization of PSBs, and reforms of PSBs and the financial ecosystem at the national level. broad sense – for responsible development and clean system.

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