Finance Minister Nirmala Sitharman met with the Heads of public sector banks on Monday to examine their performance and encourage them to increase deposit growth.
Deposits have been expanding 300-400 basis points slower than loan growth in recent months, resulting in an asset-liability mismatch across banks.
According to reports, the finance minister evaluated the bank's financial performance and progress in the execution of the government's key initiatives, such as the PM Awas Yojana, PM Surya Ghar, and PM Vishwakarma Yojana.
According to sources, Sitharman evaluated deposit growth, the credit-to-deposit ratio (CD ratio), and asset quality. The government directed the bank's CEO to focus on core banking operations and accelerate deposit growth by launching new products.
Earlier this month, the finance minister stated that there is a mismatch in deposit and loan growth. "Growth in lending is increasing...I will be meeting with banks (on August 19) for a variety of reasons, and during that time, I will discuss the necessity of deposit collecting," she stated.
She stated that the RBI has given them interest rate flexibility, and that banks should take use of that flexibility to make deposits more appealing. RBI Governor Shaktikanta Das expressed a similar sentiment, urging banks to mobilize deposits through innovative products and services that leverage their extensive branch network
"To fulfill the increased credit demand, banks are increasing their use of short-term non-retail deposits and other liability instruments. This, as I previously stated, may possibly expose the financial sector to structural liquidity difficulties," he warned.
Concerns about cyber security and banking sector dangers were also raised at the conference, according to sources. They also discussed issues such as fraud and willful defaulters, as well as the development of the National Asset Reconstruction Company Ltd (NARCL).
This is the first review meeting since the introduction of the Budget 2024-25. On the performance front, PSU banks' net profit has topped Rs 1.4 lakh crore in the fiscal year ending March 2024, showing a 35% gain over the previous.
On the performance front, PSU banks' net profit exceeded Rs 1.4 lakh crore in the fiscal year ending March 2024, representing a 35% increase over the previous year on a high base of Rs 1 lakh crore.
The 12 Public Sector Banks (PSBs) achieved a net profit of Rs 1,04,649 crore in 2022-23. According to the released data on exchanges, market leader State Bank of India (SBI) contributed more than 40% of the total profit of Rs 141,203 crore gained during FY24. SBI's profit was Rs 61,077 crore, 22% more than the previous year (Rs 50,232 crore).
