Sitharaman Asks Public Sector Banks To Increase Lending In Light Of Rate Cut

Finance Minister Nirmala Sitharaman asked public sector banks on Friday to increase lending towards productive sectors of the economy, citing the Reserve Bank's sizeable rate cut, according to a press release.

Sitharaman also said that the PSBs were capitalised adequately, with their capital to risk (weighted) assets ratio standing at 16.15% as of March 2025.

She said that public sector banks saw their total business increase from Rs 203 lakh crore to Rs 251 lakh crore from Fiscal 2022–23 to Fiscal 2024–25.

Net non-performing assets of the PSBs went down to 0.52%, net profit increased from Rs 1.04 lakh crore to Rs 1.78 lakh crore, and dividend payouts were up from Rs 20,964 crore to Rs 34,990 crore. 

Cumulative profit of 12 PSBs rose to record Rs 1.78 lakh crore in fiscal 2025, registering a growth of 26% over the previous year. The year-on-year increase in profit in absolute terms was about Rs 37,100 crore in fiscal 2025.

The finance minister emphasised that banks should onboard more customers onto government schemes, aiming to boost financial inclusion.

Sitharaman also instructed the banks to undertake efforts to improve deposit mobilisation to spur ongoing credit growth. The PSBs were advised to undertake special drives, make effective use of their branch networks, and deepen outreach in semi-urban and rural areas.  

They were also asked to proactively identify emerging commercial growth areas for the next decade, which can aid profitability and growth for the PSBs. 

They were also told to increase corporate lending in productive sectors, with a strong focus on maintaining robust underwriting and risk management standards 

Energy and nuclear sector lending was also underscored, due to plans to develop modular nuclear reactors which concerned the latter sector. 

During the meeting, officials comprehensively reviewed various banking segments and the progress of government initiatives, including the Kisan Credit Card, PM Mudra, and three social security schemes: Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana, and Atal Pension Yojana.

Additionally, the attendees advised banks to develop strategies for attracting more low-cost deposits.

(With PTI Inputs)