FM asks bank chiefs to step up rural credit flow, focus on small and marginal farmers

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Emphasis on that public sector banks (PSBs) in good shape Finance Minister Nirmala Sitharaman on Thursday advised CEOs to increase credit to small and marginal farmers and small businesses along with measures to meet credit targets set for street vendors under the PMSVANidhi scheme.

In a review meeting with the heads of PSB, Sitharaman said that PSBs are now well positioned to meet the credit needs of the productive sectors of the growing Indian economy. Discussions were held with the PSBs’ heads on positive macro trends, improving business sentiment, the ‘double balance sheet advantage’ and the performance of PSBs.

Priority sector loans

Seetraman pointed out that while the total Priority Sector Lending (PSL) has exceeded the set target, the PSL target in sub-categories especially in agriculture towards small and marginal farmers, and small enterprises should also be achieved.

She also urged Bank Chiefs to meet the credit targets of street vendors under PMSVANidhi and advised that the payments momentum gained under PMSVANidhi should be maintained.

You might recall that PSBs in total posted a record net profit of around INR 1.05 crore, nearly three times the net profit made in FY 2014.

It was noted that the asset quality of PSBs has improved significantly with total NPAs reaching 4.97% and net NPAs at 1.24% in March 2023.

At the same time, Sitharaman wanted the banks to ensure that there is fair and transparent recognition of the NPA as per the regulator’s current guidelines. It added that banks should review it internally periodically to ensure that there is proper recognition and reporting of stressed assets.

Sitharaman also advised banks to address business model risks associated with strong risk management practices and have effective and optimum asset liability management. It also wanted them to take steps to improve deposits.

Coverage by PMSVANidhi

With regard to improving lending under PMSVANidhi, it has been decided that the Union Minister of State (Finance), Bhagwat Kishanrao Karad will ensure a special campaign to expand the coverage of PMSVANidhi, with the help of Urban Local Bodies (ULBs).

Karad will visit different regions of the country in six stages before September 1, 2023 for a special credit awareness campaign on PMSVANidhi.

The Finance Minister asked banks to lead a special campaign to ensure that PMSVANidhi beneficiaries are eligible on digital payment systems.