• Source:JND
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Finance Minister Nirmala Sitharaman met the heads of public sector banks on Monday and urged them to increase deposit growth. In recent months, deposits have grown 300 to 400 basis points less than loan growth, resulting in an asset-liability mismatch for banks.

According to sources, the finance minister examined the banks' financial performance and the progress made in the implementation of various government initiatives like the Pradhan Mantri Awas Yojana, Pradhan Mantri Surya Ghar Yojana, and Pradhan Mantri Vishwakarma Yojana.
According to sources, Sitharaman reviewed deposit growth, credit-to-deposit ratio (CD ratio), and asset quality.

The minister asked the bank heads to concentrate on the core banking business and increase deposit growth by introducing innovative products. Earlier this month, the finance minister said there was a disconnect between deposit and loan growth.

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"Growth in lending is higher...I will be meeting banks (on August 19) for various reasons and in that process, I will be talking to them about the importance of deposit collection," she had said.

The RBI has granted them freedom in terms of interest rates, he stated, adding that banks should use that freedom to make deposits more enticing. Echoing similar views, RBI Governor Shaktikant Das has asked banks to use their vast branch network to collect deposits via innovative products and services.

According to sources, cyber security and financial sector risks were also discussed during the meeting. They stated that fraud and willful default-related issues and the progress of the National Asset Reconstruction Company Limited (NARCL) were also discussed.

This is the first review meeting since the presentation of the 2024-25 budget. On the performance front, PSU Bank's net profit crossed Rs 1.4 lakh crore in the financial year ending March 2024, registering a 35 percent growth over the previous year on a high base of Rs 1 lakh crore.

A combined net profit of Rs 1,04,649 crore was reported by the 12 public sector banks in 2022-2023. According to exchange-traded numbers, only market leader State Bank of India contributed more than 40% of the total earnings of Rs 141,203 crore earned during FY24.
SBI's profit increased to Rs 61,077 crore, up 22% from Rs 50,232 crore in the previous fiscal.

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(With PTI's Input)