Finance Ministry asks banks to improve their CASA, increase lending to MSMEs, Agri sector

New Delhi: The Ministry of Finance on Friday exhorted banks to improve CASA deposits and enhance their lending towards MSMEs and the agriculture sector.

On the first day of the two-day-long 'PSB Manthan' organised by the Department of Financial Services, the government raised concerns over the dwindling Current Account Savings Account (CASA) ratio of public sector banks, a senior official said.

PSU Watch is now on Whatsapp Channels. Click here to join

The meeting was chaired by Department of Financial Services Secretary M Nagaraju along with other senior ministry officials and top executives of public sector banks, including State Bank of India Chairman C S Setty and CEO of Punjab National Bank Ashok Chandra.

The public sector lenders have seen their CASA ratio dropping over the last one year, which is putting their net interest margins under pressure, the official said.

Even the largest lender of the country, SBI, saw a marginal decline in its CASA ratio in the June quarter to 39.36 percent from 40.70 percent last year and 39.97 percent a quarter ago. Similarly, Bank of Baroda's CASA ratio also fell 64 basis points on-quarter to 39.33 percent in the June quarter.

The official further said that improving CASA deposits will also help banks in their lending to key sectors of the economy. During the meeting, the public sector banks were nudged to ramp up their credit to the agriculture sector as well as job-generating micro, small and medium enterprises.

On the other hand, the ministry has asked banks to increase their lending towards the agriculture and MSME (micro, small and medium enterprise) sectors, which is the second biggest employer after the agriculture sector.

The 'Agriculture and Allied Activities' sector has long been the backbone of the Indian economy, playing a vital role in national income and employment.

With nearly 46.1 percent of the population engaged in agriculture and allied activities, ensuring financial security and accessible credit for farmers remains a top priority for the government.

It is to be noted that institutional credit disbursement through KCC increased from Rs 4.26 lakh crore in 2014 to Rs 10.05 lakh crore by December 2024.

Overall agricultural credit flow also rose from Rs 7.3 lakh crore in FY 2013-14 to Rs 25.49 lakh crore in FY 2023-24.

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Google News. Click here to follow. Also, join PSU Watch Channel in your Telegram. You may also follow us on Twitter here and stay updated.)