FM Nirmala Sitharaman to meet PSB chiefs on April 23 to push for credit expansion

Finance Minister Nirmala Sitharaman. File Photo.

Finance Minister Nirmala Sitharaman is scheduled to meet heads of public sector banks (PSBs) on April 23 to review the performance of the lenders and the progress made by them on various schemes launched by the government for the revival of the economy battered by the pandemic.

This is the first full review meeting after the presentation of Budget 2022-23. Banks would be urged to sanction loans for productive sectors to accelerate the revival of the economy, sources said.

According to sources, there would be a comprehensive review of various segments and progress in government schemes including the Emergency Credit Line Guarantee Scheme (ECLGS).

Also Read: Govt extends ECLGS scheme for MSMEs until March 2023; hospitality, aviation to get boost

In the Budget, ECLGS was extended by a year till March 2023. Further, the guarantee cover for the scheme was expanded by Rs 50,000 crore to Rs 5 lakh crore. The coverage, scope, and extent of benefits under ECLGS 3.0 for hospitality, travel, tourism, and civil aviation sectors were 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 Rs 200 crore per borrower.

Since its launch in May 2020, loans worth Rs 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.

The meeting to be held in New Delhi would set the agenda for the current financial year which has just started. During the last financial year, no PSBs faced any loss in the April-December period and clocked a collective net profit of Rs 48,874 crore during the period.

PSBs earned a combined net profit of Rs 31,820 crore in 2020-21. However, there were collective losses for five straight years during 2015-16 to 2019-20. The highest amount of net loss was registered in 2017-18 at Rs 85,370 crore, followed by Rs 66,636 crore in 2018-19; Rs 25,941 crore in 2019-20; Rs 17,993 crore in 2015-16 and Rs 11,389 crore in 2016-17.

During 2009-10 to 2014-15, PSBs were earning profits on their books.

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 Rs 3,10,997 crore to recapitalize banks during the last five financial years -- from 2016-17 to 2020-21, out of which Rs 34,997 crore were sourced through budgetary allocation and Rs 2,76,000 crore through issuance of recapitalization bonds to these banks.