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Informist, Friday, Jun. 27, 2025

NEW DELHI – Finance Minister Nirmala Sitharaman has told public-sector banks to lend in a big way after the Reserve Bank of India's 50 basis-point rate cut earlier this month to maintain the growth momentum seen in the financial year 2024-25 (Apr-Mar), a top government official said Friday. There is scope to "aggressively" lend now, the official, who was part of the review meeting held Friday, said.

Public-sector banks collectively posted a record net profit of INR 1.78 trillion for FY25, up 26%. The finance minister discussed ways in which banks could mobilise deposits, something that is as important as credit growth, the official said. The review is a routine meeting that the finance minister typically chairs following the full year results. This time, the meeting has been held for the first time after the RBI cut the repo rate by 50 bps to 5.5%.

The finance minister asked state-owned banks to maintain the credit growth momentum seen in FY25 in the current financial year. In a remarkable shift, for the first time since 2011, public-sector banks surpassed private-sector banks' loan growth in FY25. At the end of March, they had posted 13% loan growth against 9% by private-sector banks. The strong performance was across multiple segments, including traditional areas like mortgages and corporate loans, and various non-mortgage retail segments such as automobile loans.

According to the official, the banks discussed different deposit-mobilising models or measures that could be adopted across the industry. "Best practices were discussed which others can learn from," the official said.

Despite the strong FY25 performance, some analysts predict that public-sector banks may face margin pressure in FY26. On this issue, the official said most of the banks are doing well. "There is no fear as such, but they maintain (net interest margins) at current levels," the official said.

Besides credit and deposit growth, the finance minister also asked the state-owned banks to work on ways to ensure lower non-performing asset levels in the future, especially after the substantial decline in gross non-performing assets seen in FY25. "PSU banks have showcased improved asset quality and effective management of stressed assets, but it should continue," the official said. While most banks have low non-performing asset levels, the official said "one or two banks have slightly higher NPAs than the group average and they should look at lowering it".

Sitharaman also instructed the banks to onboard more customers into government-sponsored schemes, the official said. "That will also drive growth and improve investments," the official added.

The finance minister also nudged state-owned banks to increase lending to micro, small, and medium enterprises. She told them to leverage the micro, small, and medium enterprise lending model announced in the Budget for FY26, which allows banks to lend to small-ticket borrowers without financial history, collateral-free, another official said. Issues relating to cyber security were also discussed, the second official, who also attended the meeting, added.  End

Reported by Priyasmita Dutta and Sagar Sen

Edited by Rajeev Pai

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