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Goyal tells PSB chiefs to increase lending to MSMEs

New Delhi, Jan 28 (IANS) Finance Minister Piyush Goyal on Monday reviewed the performance of Public Sector Banks (PSBs) during which they committed themselves to stepping up lending to micro, small and medium enterprises (MSMEs) while also significantly increasing the level of domestic credit growth.

The PSBs also agreed step up their efforts to finance the Pradhan Mantri Awas Yojana which is aimed at securing housing for all by 2022.

At the meeting, the Finance Minister took note of the reduction in non-performing assets (NPAs) of banks under Prompt Corrective Action (PCA) framework and advised them to maintain the trend of improvement in performance with a view to bringing them out of the PCA framework at the earliest.

He also highlighted the need for each and every PSB to ensure that recent gains are sustained and better service delivered to all stakeholders.

Earlier in the day, RBI Governor Shaktikanta Das, who attended the first half of the meeting, flagged the need for further strengthening various aspects of banking, including underwriting standards, capacity building, use of technology and governance.

He flagged the need for PSBs to extend credit while observing prudential norms but without excessive conservatism. He asked banks to take advantage of the MSME restructuring scheme to support viable MSME units.

The government said the review was against the backdrop of visible signs of strengthening of the financial situation of PSBs as a result of government's approach of recognition, resolution, recapitalisation and reforms, which has positioned PSBs to step up their support to meet the lending needs of a growing economy.

"On the back of recapitalisation of PSBs by over Rs 2.6 lakh crore and recovery of over Rs 2.8 lakh crore -- including record recovery of over Rs 1 lakh crore in the first three quarters of the current financial year -- since clean-up began in 2015, and comprehensive reforms for better underwriting of loans, PSBs committed to significantly step up the level of domestic credit growth from 9.1 per cent year-on-year at the end the second quarter of the current financial year," an official statement said.

During the meeting, the banks committed to further improve on the robust growth in credit and reducing trend in turnaround time for loan applications through growing use of fintech and technology "as evidenced by the success of the 59 minutes loan portal, through which over 1.25 lakh MSMEs have been accorded in-principle approval", the statement said.

"Banks agreed to work further on increasing use of advanced data analysis and where possible, Artificial Intelligence algorithms for better, faster and hassle-free credit decisions and monitoring of accounts," it added.

The government also asked the banks to expeditiously complete the opening of branches and banking outlets in Left-wing extremism affected areas. The banks were also asked to ensure that the benefits extended under Pradhan Mantri Jan Dhan Yojana -- by making overdraft facility and accidental insurance cover on RuPay cards more attractive -- reach the common people.

"Banks were asked to leverage the pipeline of Jan Dhan-Aadhaar-Mobile (JAM) to provide better access to financial inclusion products and services to accelerate the realisation of a digitalised, financially included and insured society," the statement said.