During a recent review meeting with Managing Directors and Chief Executive Officers of public sector banks (PSBs), Finance Minister Nirmala Sitharaman encouraged banks to devise innovative and appealing deposit schemes to boost public deposits. This initiative aims to facilitate increased lending by these financial institutions.

Addressing the financial leaders, Sitharaman stressed the necessity of taking decisive administrative actions against officials involved in fraudulent activities and intentional loan defaults. She highlighted the ongoing disparity between credit and deposit growth rates, revealing a 3-4 per cent gap, even as some banks have elevated fixed deposit rates to address this imbalance. Notably, institutions like the State Bank of India and Bank of Baroda have recently hiked deposit rates by up to 125 basis points.

While commending the improved profitability of PSBs, which reported a net profit of approximately Rs 68,500 crore in the initial half of the fiscal year, Sitharaman cautioned against complacency. She underscored the urgency of combating bank fraud to preserve customer trust and financial stability. The Gross Non-Performing Assets (GNPA) ratio for scheduled commercial banks declined to a decade-low of 3.2 per cent by September 2023, a trend she encouraged banks to sustain.

Furthermore, Sitharaman directed PSBs to prioritise fraud prevention strategies, especially concerning large corporate defaults and schemes that target individual customers. She advocated for the implementation of advanced fraud detection systems and emphasised the importance of customer education on secure banking practices.

Addressing the issue of wilful defaults, Sitharaman urged banks to exercise due diligence in loan disbursement, monitor large loan accounts rigorously, and expedite legal actions against defaulters. She also called for a review of legal representatives assisting banks in pursuing default cases to enhance success rates.

The meeting also delved into the progress of the National Asset Reconstruction Company Ltd (NARCL) in acquiring stressed accounts. Sitharaman instructed banks to expedite this process and facilitate regular interactions between NARCL and financial institutions. Cybersecurity readiness among PSBs was another focal point, with the minister advocating for stringent security protocols to safeguard customer data and the broader financial system.

Minister of State for Finance Bhagwat Kishanrao Karad, Vivek Joshi, Secretary of the Department of Financial Services, and other senior officials also participated in the comprehensive discussion on fortifying India's banking sector against emerging challenges.

(With PTI inputs)