In a bid to kick-start growth, the government has pushed public sector banks to initiate a nationwide campaign to ensure credit flow to businesses, big and small. For the first time, such a massive coordinated effort is being made by the banking sector to ensure better delivery of services to customers and improve the reach of government schemes.
While the overall credit growth is still at 12%, the flow of credit to small/medium businesses remained weak and export credit growth has contracted. In a bid to counter this sluggishness, state lenders have been nudged by the government to align banking with ‘national priorities’ such as enhancing credit flow to small and medium businesses through psb59 and Mudra schemes, empowering SC/ST entrepreneurs, improving farmer income, facilitating digital transactions and focusing on green economy. PSBs are hoping that a pick-up in demand would help revive credit demand too.
The top brass of state-owned banks have held extensive talks at branch-level, as per a directive of the finance ministry, as the government sought to promote a “bottom-up” approach to herald banking reforms and help India become a $5-trillion economy in the next five years.
Nearly 15,000 officers (branch managers and above) of SBI in the country participated in this exercise across 380 locations. In Delhi alone, around 1,000 officers took part. Several other state-run banks, including Canara Bank, Bank of India, Union Bank and Oriental Bank of Commerce held similar exercises.
The country’s largest lender, State Bank of India, held three such meetings, with chairman Rajnish Kumar addressing the media in Kolkata. Kumar said credit growth has been muted mainly because of demand side constraints. “I have sufficient liquidity, but I cannot deploy it. I need demand for corporate credit to grow. The system has surplus liquidity, banks are adequately capitalised and interest rates have moderated,” he said.
Asked about the possibility of a fiscal stimulus package from the government to boost slowing economic growth, the SBI chief said, “Consultations are going on on the government’s stimulus. We have to wait for it.”
There are eight specific areas in which these banks are expected to focus, which include credit growth, infrastructure financing, financial inclusion, digital transactions and CSR activities, among others. This is the first time that such a massive exercise has ocurred. Rajkiran Rai, MD & CEO of Union Bank, said, “With the economy at an inflexion point, the policy decisions/reforms taken now will define the future of banking and its contribution to economic growth.”
The banks are also looking at specific solutions to ensure that businesses don’t suffer due to lack of credit. The auto sector has been battling a pile-up of inventory as demand collapsed with dealers not being able to get adequate credit. The country’s largest lender, SBI, had been in talks with various auto industry bodies and dealers who are saddled with excess inventory to firm up solutions, including an extension of the credit period, to ease their pain, said PK Gupta, SBI managing director, on Sunday. While the country’s largest lender doesn’t yet see a spike in its bad loans due to the worst auto sector crisis in around two decades, much will hinge on the expected revival of demand in the upcoming festive season Gupta said. To offer a breather to some auto dealers, the state-run bank had extended the credit period on a case-to-case basis, he said.
As branches are still the first point of contact for customers, banks have undertaken an extensive study to analyse their performance over the last five years and measures that need to be taken to enhance customer experience. This ‘bottom-up consultation process’ is based on several themes. A key objective of this initiative is to enhance the flow of credit to the infrastructure sector and small/medium businesses.
The government is also keen on increasing disbursal of education, health, retail loans. By drilling down to the branch level, banks will not only be able to improve upon delivery of government schemes, but also offer a better customer experience through initiatives like doorstep banking.
Arijit Basu, who is also SBI MD, said in Mumbai that suggestions received at the branch level have been collated and sent over to the regional or zonal offices where discussions were held over the weekend. The discussions included branches making presentations at their respective regional offices and inter-branch performance comparison on versions parameters. Similar exercises are being held across other branches of peer banks.
This information will be consolidated for further discussions over August 23 and 24 to be held at meetings of all the state level bankers’ committees that exist for priority sector initiatives.