Finance Ministry’s Banking Reforms Drive Resilience and Growth in Public Sector Banks

Reforms like EASE, IBC, and Digital Adoption Lead to Record Growth, Reduced NPAs, and Enhanced Customer Service in India's Banking Sector.

Under the leadership of Prime Minister Shri Narendra Modi and Union Finance Minister Smt. Nirmala Sitharaman, the Ministry of Finance has implemented significant banking reforms over recent years, establishing a foundation for financial stability and robust growth in India’s public sector banks (PSBs). Key reforms include the Enhance Access and Service Excellence (EASE) initiative, the enactment of the Insolvency and Bankruptcy Code (IBC), the formation of the National Asset Reconstruction Company Ltd. (NARCL), the amalgamation of PSBs, and the establishment of a robust governance framework. These measures have collectively strengthened the banking sector’s capacity to manage risks, enhance credit discipline, and improve customer service.

Regular Review Meetings to Address Emerging Banking Challenges

Union Finance Minister Sitharaman has chaired regular review meetings with the Chief Executives of PSBs, addressing current and emerging challenges in the sector. These sessions have been instrumental in guiding credit discipline, improving the recognition and resolution of stressed assets, and encouraging responsible lending practices. By fostering continuous improvement, the meetings have contributed to the sustained financial health of PSBs.

Record Financial Performance Reflects Sector-Wide Growth

The reforms have translated into impressive financial performance across PSBs, as highlighted by recent data:

Aggregate Business Growth: The aggregate business of PSBs reached ₹236.04 lakh crore, marking an 11% year-on-year (YoY) growth.

Credit and Deposit Expansion: The credit and deposit portfolios grew by 12.9% and 9.5% YoY, amounting to ₹102.29 lakh crore and ₹133.75 lakh crore, respectively.

Profitability: The operating profit for H1FY25 increased by 14.4% YoY to ₹1,50,023 crore, with net profit surging 25.6% YoY to ₹85,520 crore.

Reduction in NPAs: The Gross Non-Performing Asset (NPA) ratio improved to 3.12%, and the Net NPA ratio fell to 0.63% as of September 2024, indicating a YoY decline of 108 and 34 basis points, respectively.

Capital Adequacy: The Capital to Risk-Weighted Assets Ratio (CRAR) reached 15.43% in September 2024, well above the regulatory requirement of 11.5%.

These performance indicators reflect the positive impacts of the reforms, particularly in the areas of asset quality, profitability, and risk management.

Adoption of Advanced Technologies and Digital Transformation

Public sector banks have made significant strides in adopting new-age technologies like artificial intelligence, cloud computing, and blockchain to enhance efficiency and customer experience. With increased investments in digital infrastructure and strengthened cybersecurity measures, PSBs are now better equipped to offer seamless and secure banking services. These initiatives have enabled banks to provide best-in-class customer service, reach wider demographics, and enhance financial inclusion.

Future Outlook: Resilience, Innovation, and Inclusivity

The Ministry’s reforms have positioned India’s public sector banks to support a growing economy and promote financial inclusion for millions. By fostering a culture of resilience and innovation, these efforts are set to boost India’s status as a global investment destination, with PSBs playing a vital role in fulfilling the nation’s development vision of "Atmanirbhar Bharat" and the aspirational goals of Viksit Bharat@2047.