Context:
On June 28, Finance Minister Nirmala Sitharaman met with the heads of Public Sector Banks (PSBs) to review their financial performance and direct them to capitalize on the RBI’s recent 50 basis points rate cut to drive credit growth and enhance financial inclusion.
Key Highlights
Push to Boost Credit Growth Post Rate Cut
- RBI’s repo rate was reduced by 50 basis points to 5.5% on June 6, 2025, led by Governor Sanjay Malhotra.
- Sitharaman urged PSBs to ensure increased lending to productive sectors, especially MSMEs, agriculture, and infrastructure.
- Target: Maintain or exceed FY25 credit growth levels in FY26.
Focus on Financial Inclusion & Government Schemes
- Banks were directed to onboard more customers into flagship government schemes:
- Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
- Pradhan Mantri Suraksha Bima Yojana (PMSBY)
- Atal Pension Yojana (APY)
- Kisan Credit Card (KCC)
- PM MUDRA Yojana
- The FM emphasized greater coverage in rural and underserved geographies.
Strengthening Deposit Base
- PSBs were advised to mobilize more low-cost deposits to improve Net Interest Margins (NIMs), especially through:
- Financial literacy campaigns
- Savings-linked government schemes
- Business Correspondents (BCs) and digital onboarding
Asset Quality and NPA Management
- FM appreciated the low levels of NPAs in FY25 and stressed continuity in maintaining asset quality through strong risk management practices.
