Finance minister Nirmala Sitharaman will meet chiefs of public-sector banks (PSBs) on June 20 here to review large non-performing assets of over Rs 100 crore each and their overall asset quality, sources told FE.
As part of the broader review of the performance of various state-run lenders, Sitharaman will also take stock of credit flow to critical sectors of the economy and get briefed on their capital raising plans.
She will also review the progress of various financial inclusion and other schemes of the govenrment, including those announced as part of the Atmanirbhar Bharat initiative.
The meeting, convened by the department of financial services, comes at a time when the government wants banks to satiate the growing credit appetite of a fast-recuperating economy that is also facing considerable external headwinds in the wake of the Russia-Ukraine conflict.
It’s also convened amid wide expectations that the central bank may be forced to go for a third round of aggressive rate increase in August to contain elevated inflation.
On May 4, the Monetary Policy Committee (RBI) resorted to an out-of-cycle repo rate hike by 40 basis points, the sharpest increase in nearly 11 years, to 4.4% and followed it up with another 50-basis point increase in June.
While credit flow has improved in recent months amid prodding by the government, senior officials believe there is further scope for state-run banks to lend more.
Having remained subdued over most part of the last two years, credit growth has improved in recent months.
Non-food bank credit grew 11.3% on year in April, compared with 9.7% in the previous month and 4.7% a year before.
However, loans to industry grew at a slower pace of 8.1% even on a marginally-contracted base.
Since state-run banks have turned the corner — all of them turned profitable last fiscal — and remain adequately capitalised, they are in a position to further improve lending, the officials said.
The RBI had, in December 2021, warned that bad loans of commercial banks could rise to anywhere between 8.1% and 9.5% under varied degrees of stress by September 2022 from 6.9% in September 2021. Of course, the central bank had highlighted that banks were generally well-placed to weather credit-related shocks.