Well done PSBs; Now, gear up to show your mettle in the thorny path ahead

PSBs have done a good job during the pandemic and the FM's patting is a testimony, but now they have raised the bar for their performance which will act as a benchmark for their future show as the going gets tough.

India's GDP growth rates are showing declining trend in these years. In FY20, GDP registered merely four per cent growth. The nominal growth rate has also shrunk to 7.8 per cent in FY20 from 19.9 per cent in FY11. In FY21, due to Covid-19, India had contraction in GDP growth at -7.3 per cent and nominal growth negative of -3.0 per cent. The first quarter of the current fiscal was hit due to partial lockdown. However, from July things are limping back to normalcy.

In the backdrop of Covid one and two, both RBI and Centre have taken a host of measures towards infusion of liquidity of Rs12 lakh crore by RBI other than regulatory and prudential measures and centre has launched Atmanirbhar Bharath Abhiyan programme in various phases amounting to Rs29.74 lakh crore.

Centre took lots of transformation changes in terms of three agriculture reforms bills, revised labour code, opening of commercial mining to private sector, bidding airports for long-term lease to private sector, opening of partial areas of defence and air space to private sector, PLI scheme for 13 sectors, other than ongoing measures for MSME. Agriculture and free food grain and direct cash benefit transfer to poor, enhanced allocation for MNREGA, additional borrowing limits to State with the commitment of reforms.

Banks, PSBs in particular, have a major role to play to ensure that these steps, jointly undertaken by RBI and the Centre, reach to the last mile beneficiaries. Finance Minister, Nirmala Sitharaman, during her recent visit to Mumbai, was right when she heaped praise on bank staffs for doing their job efficiently during pandemic beyond all odds.

In fact, PSBs have reported a profit of Rs31,817 crore in FY21 as compared to a loss of Rs26,016 crore in FY20. This is the first year when PSBs have reported profit after five years of losses. Similarly, their gross NPA level and fraud have also come down substantially during the period. Moreover, all the PSBs have now come out of PCA regime, which is again a good sign.

But then, challenges are galore before PSBs when they are gearing up to take the pious task of taking economic growth forward.

Another Covid wave will lead to new problem in the retail and SME segments, but a severe asset quality decline is unlikely, says a report by Moody's. In a similar vein, a Crisil report says that there are few takers for restructuring 2.0 amid demand recovery. One can only hope that the PSBs will continue to do their job well, whatever difficulties come their way, and ensure that the economic growth of the country was on the right track.