FM Nirmala Sitharaman to take a call on credit expansion

New Delhi: Finance Minister Nirmala Sitharaman is scheduled to meet heads of public-sector banks (PSBs) on April 23 to review performance of the lenders and progress made by them on various schemes launched by the government for revival of the economy battered by the pandemic.

This is the first full review meeting after presentation of Budget 2022-23. Banks would be urged to sanction loans for productive sectors to accelerate revival of the economy, sources said. According to sources, there would be a comprehensive review of various segments and progress in government schemes including Emergency Credit Line Guarantee Scheme (ECLGS). In the Budget, ECLGS was extended by a year till March 2023. Further, the guarantee cover for the scheme was expanded by Rs50,000 crore to Rs5 lakh crore. The coverage, scope and extent of benefits under ECLGS 3.0 pertaining to hospitality, travel, tourism and civil aviation sectors were expanded. Also, the credit limit for eligible borrowers was increased to 50 per cent of their fund-based credit outstanding from 40 per cent earlier.

The enhanced limit is subject to a maximum of Rs 200 crore per borrower. Since its launch in May 2020, loans worth Rs 3.19 lakh crore have been sanction till March 25, 2022. About 95 per cent of the guarantees issued are for loans sanctioned to micro, small and medium enterprises. The meeting to be held in New Delhi would set the agenda for the current financial year which has just started. During last financial year, no PSBs faced any loss in the April-December period and clocked a collective net profit of Rs 48,874 crore during the period. PSBs earned a combined net profit of Rs 31,820 crore in 2020-21. However, there were collective losses for five straight years during 2015-16 to 2019-20.

The highest amount of net loss was registered in 2017-18 at Rs 85,370 crore, followed by Rs 66,636 crore in 2018-19; Rs 25,941 crore in 2019-20; Rs 17,993 crore in 2015-16 and Rs 11,389 crore in 2016-17. During 2009-10 to 2014-15, PSBs were earning profits on their books. To improve financial health of PSBs, the government implemented a comprehensive 4Rs strategy -- recognition of NPAs transparently, resolution and recovery of value from stressed accounts, recapitalising of PSBs, and reforms in PSBs and the wider financial ecosystem -- for a responsible and clean system. Comprehensive steps were taken under the 4Rs strategy to reduce NPAs of PSBs. As part of the strategy, the government has infused Rs 3,10,997 crore to recapitalise banks during the last five financial years -- from 2016-17 to 2020-21, out of which Rs 34,997 crore were sourced through budgetary allocation and Rs 2,76,000 crore through issuance of recapitalisation bonds to these banks.