Finance Minister asks PSBs to support boosting growth and employment

The External Affairs and Finance Minister, Shri Pranab Mukherjee held a meeting with Chief Executives of Public Sector Banks here today and reviewed credit delivery and credit quality in the wake of the slow- down of the economy. In his opening remarks, Shri Mukherjee said that this meeting was set in the context of a global macro-economic outlook which is not encouraging and whose adverse impact on the real sector of this country is being witnessed.

The Finance Minister observed that "The Indian economy has experienced a slight moderation in growth accompanied by high inflation in the first half of 2008-09. We should look for solutions to counter the adverse impact of the uncertainty in the global economy and concentrate on domestic demand creation. We must support the development of those sectors which immediately boost growth and throw up employment opportunities and focus on primarily stimulating demand in rural areas and in highly labour intensive sectors."

Shri Mukherjee said that both the Government and the RBI had acted to protect the economy from the adverse impact of the crisis since mid-September 2008. While the Government has announced two major fiscal stimulus packages to boost the economy, RBI's approach has been to provide ample rupee liquidity, ensure comfortable forex liquidity and maintain a monetary policy environment conducive to the continued flow of credit to productive sectors. Observing that there has been a definite credit contraction in respect of category of private sector banks and foreign banks and other sources, Shri Mukherjee said that this increases the responsibility of the public sector banks to meet the credit needs of the economy so that the growth is not adversely affected through a credit constraint.

Shri Mukherjee reviewed the trends and progress in important performance parameters of Public Sector Banks (PSBs) like deposits, Non-performing Assets (NPAs), steps taken to promote forex liquidity, implementation of the stimulus package announcements and financial inclusion.

He noted that though action had been initiated on all fronts in respect of the stimulus package, constant review would be required to ensure the objectives are achieved. He expressed satisfaction that most of the PSBs had opened in this year at least 250 new accounts per branch in semi-urban and rural areas.

Shri Mukherjee reviewed in detail the sectoral credit flow and observed that PSBs need to lend more to agriculture and exceed set targets so that shortfall, if any from the cooperatives, is compensated. Agriculture credit at the end of December 2008 was Rs.1,69,000 crore against the target of Rs.2,80,000 crore. Scheduled Commercial Banks had lent 63.29 per cent of their target so far.

Shri Mukherjee also observed that even though increase in outstanding non-food credit between September-end 2008 and January 2009 was Rs.93,280 crore, a figure which was higher than the corresponding figure of Rs.74,572 crore last year, and fresh sanctions in the same period were Rs.2,99,271 crore against Rs.2,14,757 crore of last year, there is need to pay special attention to the micro and small industries. He observed that steps need to be taken to increase their coverage under the credit guarantee scheme and to provide necessary relief to these enterprises.

Shri Mukherjee advised that PSBs should take all necessary steps to sustain operations of their clients and meet all need based credit requirements.

The Chairman, Indian Banks Association, Shir T.S. Narayanasami and Chairman, State Bank of India and Chairman & Managing Director, Punjab National Bank also spoke and outlined the need to guard against increasing NPAs and the need to provide additional capital. Chairman, NABARD, Chairman & Managing Director, Exim Bank, Chairman, NHB and Chairman & Managing Director, SIDBI also explained the action taken in their respective sectors.

Source : Press Information Bureau

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