Why PSBs lag in MSME lending

Despite public-Sector banks (PSBs) also showcasing advancements in digital banking and mobile app services, they need to enhance performance on ensuring liquidity to MSMEs.

The Union Finance Ministry has asked state-owned banks to focus on accelerating credit to MSMEs and the agriculture sector while sustaining growth in low-cost deposits and strengthening risk management.

Department of Financial Services (DFS) Secretary M Nagaraju while chairing a review meeting urged banks to further strengthen risk management, underwriting practices, and operational resilience to sustain profitability in an evolving financial environment.

Addressing CEOs of public sector banks here recently, he asked them to sustain financial discipline, deepen customer-centricity, and lead India's banking transformation with prudence, innovation and inclusion as guiding principles, a ministry statement said.

Nagaraju emphasised that digital banking must remain inclusive and secure, urging banks to enhance cyber resilience, ensure operational continuity and improve the quality and timeliness of grievance redressal.

He encouraged banks for adoption of responsible AI and data analytics to improve customer service delivery. Banks were advised to strengthen implementation of PM Surya Ghar Muft Bijli Yojana, PM Vidya Lakshmi Yojana, PM Vishwakarma Yojana, and JanSamarth digital lending initiatives, with emphasis on reducing application turnaround time and expanding assisted journeys through Business Correspondents and SLBC coordination, it said.

The Secretary also reviewed performance under financial inclusion programmes such as PMJDY, PMJJBY, PMSBY, APY, PMMY and PM SVANidhi, and emphasised the importance of the ongoing “Aapki Poonji, Aapka Adhikar” campaign, it said.

Directions were given to the CEOs to ensure seamless implementation, enhance public awareness of the integrated unclaimed asset portal and intensify outreach in underserved and aspirational districts. On the asset quality front, it was noted that PSBs continued to register improvement in recoveries.

The National Asset Reconstruction Company Limited (NARCL) has acquired debt aggregating Rs 1.62 lakh crore and achieved significant recoveries during the first half of the year. Banks were advised to leverage digital platforms such as BAANKNET for faster and transparent resolutions and to maintain focus on strengthening early warning systems, it said.