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Indian Economy

Bottom-up Consultative Process for PSBs

  • 19 Aug 2019
  • 4 min read

The Finance Ministry has asked Public Sector Banks (PSBs) to initiate a month-long consultation process with officers at branch level to seek suggestions on streamlining banking sector to help the country achieve its target to become a 5 trillion dollar economy by 2024-25.

  • The consultative process has been divided into three stages with the first being at the branch or regional level, followed by the state level. It will culminate with a national-level two-day brainstorming in Delhi.
  • The suggestions emanating from a month-long campaign beginning 17th August, 2019 will be used as inputs to prepare a road map for the future growth of the banking sector.

Agenda of the Process

Background

  • The economy of the country has slowed to a 5-year low of 6.8%.
    • The automobile sector is facing its worst crisis in two decades and reports suggest thousands of job losses in the auto and ancillary industry.
    • In the real estate sector, the number of unsold homes has increased, while fast-moving consumer goods (FMCG) companies have reported a decline in volume growth in the first quarter (April - June, 2019).
  • Banks, facing the charge of not passing on the full extent of the easing of the policy rates. The Reserve Bank of India (RBI) had cut the repo rate by 75 basis points between February and June, 2019, but banks have reduced their interest rates on fresh rupee loans by 29 basis points only.
  • Though lending by banks to industries has shown a significant jump from 0.9% in the June 2018 quarter to 6.6% in the corresponding period of 2019, the same to the job-creating MSME sector has slipped from 0.7% to 0.6% during the same period.
  • However, there has been an improvement in non-performing assets of the banks. The total bad loans of commercial banks declined by Rs 1.02 lakh crore to Rs 9.34 lakh crore in 2018-19.

Source: TH

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