Finance Minister Nirmala Sitharaman held a performance review meeting with the heads of public sector banks on Monday, urging them to enhance their deposit growth.
Recent data shows that deposit growth has lagged 300-400 basis points behind credit growth in recent months, leading to an asset-liability mismatch for banks.
During the meeting, Sitharaman reviewed the financial performance of the banks and assessed their progress in implementing key government schemes, including PM Awas Yojana, PM Surya Ghar, and PM Vishwakarma Yojana. She also examined deposit growth, the credit-to-deposit ratio (CD ratio), and asset quality.
The Finance Minister encouraged bank chiefs to focus on their core banking operations and to introduce innovative products to accelerate deposit growth. She had previously highlighted the discrepancy between deposit and lending growth, noting that while lending has increased, deposit growth has not kept pace.
Earlier this month, Sitharaman had mentioned the importance of deposit collection and urged banks to use the flexibility provided by the Reserve Bank of India (RBI) to make deposits more attractive.
RBI Governor Shaktikanta Das supported this view, advising banks to mobilise deposits through innovative products and utilise their extensive branch networks. He warned that reliance on short-term non-retail deposits to meet incremental credit demand could pose structural liquidity risks to the banking system.
The meeting also addressed concerns about cybersecurity, financial sector risks, fraud, wilful defaulters, and progress on the National Asset Reconstruction Company Ltd (NARCL).
This was the first review meeting following the presentation of Budget 2024-25.
On the performance front, public sector banks reported a net profit of over Rs 1.4 lakh crore for the financial year ending March 2024, marking a 35 per cent increase from the previous year's profit of Rs 1 lakh crore. State Bank of India (SBI) was a major contributor, accounting for more than 40 per cent of the total profit with earnings of Rs 61,077 crore, a 22 per cent rise from the previous year.
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