Amid a push to accelerate economic growth, FM asks govt banks to lend more aggressively, directing public sector banks (PSBs) to extend more credit to priority sectors like MSMEs, agriculture, and housing. This call comes shortly after the Reserve Bank of India (RBI) slashed its benchmark interest rate by 50 basis points and released ₹2.5 lakh crore liquidity through a CRR cut.
Lending Must Follow Monetary Easing
Finance Minister Nirmala Sitharaman emphasized the importance of turning monetary policy into ground-level credit growth. Banks were told to ensure quicker, broader lending to productive sectors, especially where government guarantees exist under various credit schemes.
The FM advised banks not to hesitate in sanctioning loans that align with official programs, reminding them that scrutiny should not delay credit delivery.
Focus on Small Deposits and Retail Outreach
She also instructed banks to move away from a dependence on large wholesale deposits and instead focus on mobilizing small, stable deposits. This includes enhancing outreach through savings accounts, recurring deposit products, and fixed deposit innovations—critical to maintaining a healthy credit-deposit ratio.
Banks were asked to innovate their deposit products and leverage digital channels to tap into India’s large rural and underbanked segments.
Why This Push Is Timely
The FM’s remarks follow the RBI’s sharp rate cut and CRR release, which have made credit cheaper and infused significant liquidity into the system. However, data shows credit growth still lags behind deposit growth, putting pressure on banks to increase lending without compromising asset quality.
Government-backed schemes like Mudra, ECLGS, and PM Vishwakarma have created avenues for safe, targeted lending that banks are being urged to utilize more fully.
Sectoral Lending Emphasis
- MSMEs: Special push to ensure credit flow reaches small businesses that are key job creators.
- Agriculture & Rural Lending: Timed with a good monsoon season, agri-lending is expected to rise.
- Housing: Affordable housing continues to be a key focus under PMAY, offering banks low-risk growth.
Bank Performance Context
PSBs recorded a record combined net profit of ₹1.78 lakh crore in FY25, supported by declining NPAs and strong recoveries. The government now expects these gains to translate into broader credit deployment, not just better balance sheets.
Conclusion
With ample liquidity and record PSB profits, FM asks govt banks to lend more aggressively to stimulate real sector growth. The success of this policy depends on how quickly banks act on these directions—especially in rural India and among small borrowers.
