Finance Minister Nirmala Sitharaman will meet public sector banks (PSB) chiefs in New Delhi on April 23 to review their performance in FY22 and set the agenda for the current fiscal. 

For the April-December 2021 period, PSBs had cumulatively recorded net profit of ₹48,874 crore, clearly indicating that the bad days may be behind them. These banks had recorded collective losses for five straight years, from 2015-16 to 2019-20. PSBs registered a combined net profit of ₹31,820 crore in 2020-21. 

This will be the first full review meeting after the presentation of this year’s Budget and post the break-out of the Russia-Ukraine conflict. 

Indications are that the Finance Minister will set a direction to the credit growth aspirations for PSBs in an economy that is now on a recovery mode. Credit growth is looking up with RBI not expected to quickly roll back its liquidity measures and accommodative monetary policy stance announced to support the economy during Covid-19.

Progress of various government schemes, including the Emergency Credit Line Guarantee Scheme (ECLGS), which was a lifeline for MSMEs in tough economic environment, is expected at the review meeting, sources said. The actual agenda for the meeting is yet to be firmed up, they added.

In Budget 2022-23, ECLGS was extended by a year till March 2023. Also, the guarantee cover for the scheme was expanded by ₹50,000 crore to ₹5-lakh crore. The coverage, scope, and extent of benefits under ECLGS 3.0 for hospitality, travel, tourism, and civil aviation sectors have also been expanded.

Also, the credit limit for eligible borrowers was increased to 50 percent of their fund-based credit outstanding from 40 percent earlier. The enhanced limit is subject to a maximum of ₹ 200 crore per borrower.

Since the ECLGS launch in May 2020, loans worth ₹3.19-lakh crore have been sanctioned till March 25, 2022. About 95 percent of the guarantees issued are for loans sanctioned to micro, small and medium enterprises.

To improve financial health of PSBs, the government implemented a comprehensive 4Rs strategy — recognition of NPAs transparently, resolution and recovery of value from stressed accounts, recapitalising of PSBs, and reforms in PSBs and the wider financial ecosystem — for a responsible and clean system. Comprehensive steps were taken under the 4Rs strategy to reduce NPAs of PSBs.

As part of the strategy, the government has infused ₹3,10,997 crore to recapitalise banks during the last five financial years — from 2016-17 to 2020-21, out of which ₹34,997 crore were sourced through budgetary allocation and ₹2,76,000 crore through issuance of recapitalisation bonds to these banks.

Related Topics
comment COMMENT NOW