Bankers have advocated the idea of differentiated lending to ensure they focus on their strengths relating to their locations and expertise and not be worried about competition.
The Department of Financial Services (DFS) will soon lay out an action plan for banks on differentiated lending to improve loan growth and look at improvements in the insolvency process to push resolution of non-performing assets (NPAs).
The weekend “PSB Manthan” meeting with public sector banks (PSBs) called upon by the DFS at the SBI academy in Gurugram saw deliberations on six themes including credit growth, bad loan resolution, micro, small and medium sector enterprise lending, deepening of financial inclusion, consolidation and responsive and responsible lending.
A large public sector bank executive present at the meeting said, “There was participation from bankers in large numbers and presentations were made to chalk out the problems and a few suggestions were made to the Finance Minister. The DFS will view the suggestions and soon come out with directions or actionables for bankers to weed out the problems relating to bad loans and ensure banks focus on their strengths while lending.”
On October 24, the government announced a Rs 2.11 lakh crore recapitalisation plan through bonds, government infusion and market funding to meet capital requirements for the next two years to strengthen public sector banks, sitting on mounting stressed loans amid weak loan demand and capital constraints.
“Basically, the six topics were presented by bankers to the FM and the DFS to push credit offtake, better experiences for customers and NPAs, among other things. The government acknowledged that NPAs are legacy issues but are hopeful of resolutions through the IBC (Insolvency and Bankruptcy Code). We asked for more clarifications on the code and they took heed to our problems,” said another large public sector bank chief who also attended the meeting.
Bankers advocated the idea of differentiated lending to ensure they focus on their strengths relating to their locations and expertise and not be worried about competition.
This was first recommended in 1991, by a committee under the chairmanship of former Reserve Bank governor M Narasimham, which suggested a three-tier structure having four lenders as global banks, 10 nationwide universal banks and local banks that would focus on specific regions.
DFS couldn’t immediately be reached for comment but banking secretary Rajiv Kumar has made it clear that there would be no easy money for banks.
Another banker added, “As announced, the government will also lay out the contours of its recapitalisation plan depending on the banks’ needs and performances to support loan growth amid high provisions towards the NPA accounts undergoing insolvency.”Last month end, the government had also set up a ministerial panel, led by the Finance Minister, to oversee the consolidation and merger of the 21 state-run banks in the country.