According to an official statement issued on Wednesday, the Finance Ministry has directed public sector banks (PSBs) to maintain healthy growth in low-cost deposits and lending to micro, small and medium enterprises (MSMEs) and agriculture sector while ensuring strong risk management.Chairing a performance review meeting with bank chiefs, Department of Financial Services (DFS) Secretary M Nagaraju urged the state-owned lenders to combine prudence with innovation and deepen their focus on customer-centric banking. “Banks must lead India’s financial transformation guided by prudence, inclusion and innovation,” the ministry said in a statement summarizing the discussions, PTI reported.During the meeting, PSBs presented updates on digital banking, mobile app progress and customer outreach. Calling for a balanced approach between digital expansion and inclusivity, Nagaraju stressed the need to ensure cyber security, operational flexibility and speedy grievance redressal. He also encouraged banks to responsibly use artificial intelligence and data analytics to improve customer experience and lending efficiency.Banks were asked to increase loan disbursement under key government initiatives, including PM Surya Ghar Free Electricity Scheme, PM Vidya Lakshmi Yojana, PM Vishwakarma Yojana and Jan Samarth Digital Loans, with a focus on faster loan processing and extended support through business correspondents.The review also covered the progress of key financial inclusion schemes like PM Jan Dhan Yojana (PMJDY), PM Jeevan Jyoti Bima Yojana (PMJJBY), PM Suraksha Bima Yojana (PMSBY), Atal Pension Yojana (APY), PM Mudra Yojana (PMMY) and PM Swanidhi. Nagaraju asked banks to increase reach in aspirational and underserved districts under the government’s Your Capital, Your Rights campaign and ensure effective implementation of the integrated unclaimed property portal.On the asset quality front, PSBs have registered a steady improvement with a decline in gross NPAs to 2.30% and net NPAs to 0.45% by September 2025. Recovery has also picked up pace, with National Asset Reconstruction Company Limited (NARCL) recovering bad loans worth Rs 1.62 lakh crore in H1FY26.Banks were advised to make better use of digital tools like BAANKNET for transparent solutions and to strengthen early warning systems. The meeting also highlighted the need to prepare for the change in Expected Credit Loss (ECL) accounting framework through data-driven provisioning and robust risk models.Public sector banks posted a combined net profit of Rs 93,675 crore in H1FY26, showing steady year-on-year growth. Total business stood at Rs 261 lakh crore, with a year-on-year growth of 12.3% in advances and 9.6% in deposits.DFS said the PSBs are expected to lend to emerging sectors such as renewable energy, food processing, tourism and data centres, in line with the government’s Developing India 2047 vision.“The focus of the ministry is clear – growth must be inclusive, digital and sustainable,” an official familiar with the meeting told the news agency.
