Will take decisive steps to stabilise banking system: FM Sitharaman

Sitharaman also said that the 'Samudra Manthan' of sorts in the banking sector under PM Narendra Modi's leadership yielded positive results along with expected challenges during the 'churn'

Union Finance Minister Nirmala Sitharaman on Friday said the government is dedicated to expanding formal banking access and will continue to take decisive measures to strengthen and stabilise the banking system.

This will ensure that banks support India's growth path to Viksit Bharat by 2047.

“Our government has ‘banked the unbanked’ and ‘funded the unfunded’, in line with the ethos of Antyodaya. We remain committed to further driving financial inclusion and empowering the underprivileged,” Sitharaman said in a series of posts on ‘X.

FM also said the 'Samudra Manthan' of sorts in the banking sector under PM Narendra Modi's leadership yielded positive results along with expected challenges during the 'churn’.

“Due to our government’s policy response to recognition of stress, resolution of stressed accounts, recapitalisation and reforms in banks, the financial health and robustness of public sector banks (PSBs) have improved significantly since 2014,” she added.

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FM pointed out that the Modi government has turned banks from being 'NPA-laden nightmares' into 'Pillars of Jan Kalyan'.

During FY24, PSBs recorded the highest-ever aggregate net profit of Rs 1.41 trillion, almost 4 times higher than Rs 36,270 crore in FY14.

PSBs declared a dividend of Rs 27,830 crore to shareholders (Centre’s share Rs 18,088 crore) in FY24.

Net non-performing assets (net NPAs) of PSBs declined to 0.76 per cent in March 2024 from 3.92 per cent in March 2015. They were at a peak of 7.97 per cent in March 2018.

However, gross NPA ratio of PSBs declined to 3.47 per cent in March 2024 from 4.97 per cent in March 2015. The peak of 14.58 per cent was in March 2018.

The finance minister, in her posts, said that bank credit growth (non-food) was 16 per cent in FY24, the highest in 10 years.

“This would not have been possible without a significant improvement in the banking sector's health. Resilience has increased, with the provisioning coverage ratio (PCR) increasing to a healthy 92.99 per cent in March 2024 from 46.04 per cent in 2015,” she added.

Sitharaman also added that due to reforms, PSBs' ability to raise capital (equity and bonds) has improved.

PSBs have mobilised capital of Rs 4.34 trillion from the market between FY15 and FY24.

“Macro stress tests for credit risk indicate that banks are well-capitalised. All banks comply with the minimum capital requirements even under adverse stress scenarios,” she added.