In a recent revelation, Banking Secretary Vivek Joshi has brought attention to a concerning trend affecting public sector banks (PSBs) in India. The decline in savings account deposits is happening at a faster pace for PSBs compared to their private counterparts, posing a significant challenge to the banking sector.
The primary culprit behind this shift is identified as the flow of funds into mutual funds. Joshi underscores the importance of addressing this issue promptly, as it not only affects the current and savings account (CASA) performance but also puts pressure on the net interest margins of government-owned banks.
The latest data reveals that the deposit growth for PSBs stands at approximately 13%, lagging behind the advances growth rate of around 16%. Joshi emphasizes the need for urgent measures to reverse this trend and ensure the financial stability of PSBs.
To tackle these challenges, the government is actively seeking exemptions for PSBs under the 75% minimum public shareholding norm, proposing an extension until August 2025. While the State Bank of India (SBI) holds a 56% stake, other PSBs face higher government shareholding, making it crucial to implement measures that encourage private investment and reduce dependency on government support.
Financial inclusion, non-performing asset (NPA) recovery, and cybersecurity continue to be the focal points for PSBs. Joshi highlights the significance of government schemes such as Prime Minister Jan Dhan, Suraksha Bima Yojana, and new initiatives like PMSVANidhi for street vendors and PM Vishwakarma for artisans in promoting economic resilience.
In the fiscal year 2024, PSBs achieved loan recoveries totaling ₹61,000 crore, emphasizing the commitment to improving recovery processes. The focus remains on maintaining awareness of NPAs even after technical write-offs, ensuring a robust and transparent approach to handling financial challenges.
As the government aims to navigate these challenges, it is imperative to reinforce the stability and growth of PSBs in the evolving banking landscape. Proactive measures, policy adjustments, and strategic investments are essential to secure the financial well-being of public sector banks amidst dynamic market conditions.
