Finance Minister Nirmala Sitharaman on Saturday said the public sector banks’ profit in the last nine years has tripled to Rs 1.04 lakh crore due to initiatives taken by the government and underlined the need for continuing the momentum to fuel the economy.
The net profit of public sector banks (PSBs) has almost tripled to Rs 1.04 lakh crore in FY23 from Rs 36,270 crore in FY2014.
Inaugurating the corporate office of Punjab and Sind Bank here, the minister said that banks need to “build on laurels” by following the best corporate governance principles.
“Banks should not sit back and revel in success. They should follow best corporate governance practices, adhere to regulatory norms, ensure prudent liquidity management, and continue to focus on having robust asset-liability and risk management,” she said, stressing that the Indian economy has moved away from the ‘twin balance sheet problem’ to ‘twin balance sheet advantage’.
The finance minister said that there was a time when the Indian economy faced the problem of twin balance sheets — stress on the balance sheets of banks and corporate at the same time.
Before the Modi government came to power in 2014, difficulty in the Indian banking system actually started because of irrational ‘Phone Banking’, which happened during the tenure of the UPA government, she said.
Back then, Sitharaman said, the priority in lending was given to not-so-worthy customers in an unprofessional manner.As a result, they became NPAs (non-performing assets).
“As a result (of various initiatives of the government), I am glad to say the problems of twin balance sheets have gone away,” she said, adding that as per the Reserve Bank of India, it is a twin balance sheet advantage that is benefiting the Indian economy.
Observing that combined profits of the public sector banks tripled to Rs 1.04 lakh crore in 2022-23 against Rs 36,270 crore in FY14, Sitharaman said the banks “need to build on laurels”.
“At this stage, it is our duty towards the people of India to ensure that the banks can build on the strength and not lose this momentum that we have achieved,” the minister noted.
She said that the performance of the public sector banks has improved on account of various initiatives taken by the Modi government since 2014.
There was an improvement in all critical parameters like return on asset, net interest margin and provisioning coverage ratio, she added.
The 4R strategy followed by the Modi government to revitalise the state-owned banks has yielded results, she said.
The 4R strategy refers to recognising the problem of non-performing assets, recapitalising the banks, resolving their problems, and reforming them.
Further, Sitharaman said the banks should endeavour to adopt a proactive approach in reaching out to people to achieve optimum utilisation of financial inclusion schemes.
There should be a focus on credit outreach in states where the credit offtake is lower than the national average, particularly in the northeast and eastern parts of the country, she said, adding they must aim to increase brick-and-mortar banking presence in border areas, particularly in those covered in the Vibrant Village programme.
The bank should also promote the Mahila Samman Bachat Patra announced in the Budget 2023-24 through special drives and campaigns, she said.
They must ensure that the entire Priority Sector Lending (PSL) target is met and not transferred to RIDF (Rural Infrastructure Development Fund), she added.
She urged banks to focus on improving digital infrastructure with a focus on artificial intelligence and use this to the maximum so that efficiency increases.
However, she cautioned that banks should ensure digital safety and there should be enough firewalls.
The minister also recalled the story of the Punjab and Sind Bank, which had suffered due to partition in 1947.
Only two of the ten branches remained in India, while the rest went to Pakistan.
Starting from just two branches in 1947, the Punjab and Sind Bank has 1,553 branches, and the 1,554th at Karimganj in Assam was inaugurated remotely by the minister on Saturday.
Speaking on the occasion, Minister of State for Finance Bhagwat Kishanrao Karad also appreciated the bank for its various initiatives to transfer the bank to a future-ready Techno Savvy Bank and how the bank over the years has transformed itself gradually with the latest products and services.
He also expressed satisfaction with the role played by public sector banks in making the Indian Financial System reliant and robust.
Additional Secretary in the Department of Financial Services MP Tangirala also highlighted how Punjab and Sind Bank as a PSB is contributing to the overall development of the Indian Economy through its network of branches, ATMs and business correspondents.
