After review meet with PSB heads, Goyal says banks will turn more profitable

New Delhi: After holding a review meeting with state-owned lenders on January 29, Finance Minister Piyush Goyal said that public sector banks (PSBs) will become more profitable, vibrant and proactive in the days to come. "The sum and substance of today's meeting is we are going to see a far more vibrant, proactive, profitable banking sector in the days to come," Goyal said. "We would like them to look at ways to improve delivery of services to farmers. We would like them to be more proactive in encouraging retail businesses."

What were the issues discussed?

During the meeting, which came days ahead of the interim budget, heads of PSBs discussed issues faced by them in taking bad loan cases to the National Company Law Tribunal (NCLT) and deliberated on ways to boost credit, particularly for micro, small and medium enterprises (MSMEs), and improve recovery of bad loans.

Goyal said discussions were held on support to MSMEs and businesses, along with ways to promote finance for housing and give a thrust to homeowners.

"Bankers expressed confidence that after the government amended the Prevention of Corruption Act while anybody indulging in bad practices will not be spared, (and) genuine commercial decisions by bankers will be protected," Goyal said. He added the government was "fully backing" every PSB, which would perform better at the earliest.

The meeting came after Reserve Bank of India (RBI) Governor Shaktikanta Das addressed the PSB heads earlier in the day to take stock of the liquidity situation, particularly in non-banking financial companies, said a PSB executive.

RBI Governor asked PSBs to make provisions for bad loans

According to sources, PSB heads were asked to make provisions for bad loans. Also, Das emphasised on the need to strengthen various aspects of banking, including underwriting standards, capacity building, using tech, and governance.

"The idea (behind the meeting) was to share with PSB chief executives the regulator's expectations from the banking sector and also to listen to them about their assessment of the state of the banking sector in general and the PSBs in particular and their take on the outlook of PSBs," Das told reporters.