Free Press Journal

FM to banks: take commercial decision without fear or favour


Arun Jaitley

New Delhi: Promising financial autonomy to PSU banks, Finance Minister Arun Jaitley today asked heads of public sector lenders to take commercial decisions without fear or favour. At the same time, he advised banks to facilitate appropriate credit expansion to meet the needs of the productive sectors of the economy so that the momentum of economic growth is sustained. “CEOs of the banks and financial institutions (should) take commercial decisions without fear or favour as the government is committed to providing them financial autonomy both in letter and spirit,” Jaitley said. The Minister was speaking at a meeting to review the quarterly performance of the public sector banks (PSBs) and financial institutions (FIs) here.

He insisted that the banks should have strong public grievances redressal mechanism in place so that their clients do not have to approach the government to redress their grievances. The banks, he said, should adopt differentiated strategies and capital augmentation plans through innovative financial instruments, which would allow the banks to meet their capital requirements. Appreciating the work done by banks in Pradhan Matri Jan Dhan Yojana (PMJDY), the Finance Minister said achieving near total financial inclusion in a short period of time has shown that the banking system is capable of delivering the desired output when our energies are focused on the priority area.

Jaitley also mentioned about the specific budget announcements made while delivering his Budget Speech 2015-16 to introduce Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana and Atal Pension Yojana. He said he expected that PSBs would play an active role in successful implementation of these schemes.

According to a statement issued by the Finance Minister, Jaitley expressed the hope that public sector banks would show the resolve in containing the slide in financial performance parameters such as credit growth, profits and stressed assets. The government, he said, will induce greater professionalism in governance and management reforms of PSBs. During the meeting there was an analysis of NPAs across sectors and it was expected that both the PSBs and the government would continue with the measures to improve the asset quality. The government is in the process of establishing six new Debt Recovery Tribunals (DBTs) to speed up the recovery of bad loans.

Some actions on the part of the banks, identified at Gyan Sangam in January, 2015 relating to risk management and asset quality, would be taken by them, he said. It was informed that out of 355 Joint Lenders’ Forum (JLF) formed by banks during the period July 1, 2014 to February 26, 2015, 254 JLFs were formed by PSBs out of which State Bank of India has shown a lead with 107.

Resolution of stalled projects would help PSBs in improving the asset quality, he said. During the period between April 2014 and January 2015, PSBs received 88 new projects or proposal (with investment of Rs 250 crore) with a total investment of Rs 1.41 lakh crore.

These are in various stages of appraisal, sanction and stage-wise disbursements, he said. NPAs (non-performing assets) of the banks have gone up during the last few years. Gross NPAs of the public sector banks increased from Rs 71,080 crore in 2011 to Rs 2,16,739 crore as on March 31, 2014.

The NPAs of public sector banks rose sharply to 5.33 per cent of total advances in September 2014 from 4.72 per cent in March 2014. He further said that the credit growth in housing sector is higher compared to the overall credit growth and the NPAs are lower, making this sector a priority sector for further growth of credit without concomitant fear of rise in NPAs.

The overall targets for minority sector lending have been achieved. The progress under the educational loans is to be accelerated. PSBs were advised to follow the revised guidelines of Model Educational Loan Scheme scrupulously. Referring to ‘Make in India’, Jaitley said banks should increase lending to MSME sector with a view to boosting manufacturing.

“The lending targets for MSE sector are critical in achieving successful implementation of the ‘Make in India programme. “Therefore, credit needs of this sector may be met by the PSBs and therefore, there is need to achieve all targets of MSE lending, as some banks have not achieved the targets for MSE lending,” the statement said.

Referring to financial inclusion scheme, the Finance Minister said the next phase of Jan Dhan Yojana would be focused on mobilisation of financial savings to reverse the decline in the savings rate. “This would be possible by activating the PMJDY accounts by progressive use of Direct Benefit Transfer (DBT), increasing financial literacy and creating universal social security cover for all citizens, especially the poor, under-privileged and workers in un-organised sector,” Jaitley said.

Separate sessions were organised on firming-up the operational framework of proposed insurance and pension schemes in consultation with stakeholders. Financial parameters such as profitability, net interest margin and review of business parameters during the quarter ending December, 2014 were discussed during the meeting and reasons attributable to varied performances were ascertained.

While the overall agricultural credit target was achieved and the flow of such credit has been satisfactory during 2014-15, it was expected that all efforts would be made to make the agricultural credit available to all the eligible farmers in the country. However, he said since the share of investment credit in the banks is going down, the PSBs were urged to reverse this trend by increasing the term loans in agriculture.