FM nudges PSU banks to raise credit growth, maintain profitability

New Delhi: Finance Minister Nirmala Sitharaman on Friday asked public sector banks (PSBs) to take advantage of Reserve Bank's jumbo 50 basis points rate cut to increase lending toward productive sectors of the economy.

During a meeting to review financial performance of PSBs, Sitharaman asked their chiefs to maintain profitability momentum in FY26, sources said.

Cumulative profit of 12 PSBs rose to record Rs 1.78 lakh crore in FY25, registering a growth of 26 per cent over the previous year. The year-on-year increase in profit in absolute terms was about Rs 37,100 crore in FY25.

According to sources, the minister expected that PSBs credit growth should improve post 50-bps rate cut by RBI. Banks were also directed to try maintain the FY25 credit growth level or increase during the current financial year.

On June 6, the RBI's six-member monetary policy committee, headed by Governor Sanjay Malhotra lowered the benchmark repurchase or repo rate by 50 basis points to 5.5 per cent.

It also slashed the cash reserve ratio by 100 basis points to 3 per cent in tranches that will add Rs 2.5 lakh crore to already surplus liquidity in the banking system.

She also emphasised that banks should also onboard more customers on government's schemes in a bid to increase financial inclusion.

Comprehensive review of various segments and progress in government schemes including Kisan Credit Card, PM Mudra and three social security schemes -- Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana and Atal Pension Yojana (APY) were done during the meeting.

Besides, the banks were also advised to work on ways to garner more low cost deposits.

On the asset quality side, the finance minister appreciated the low level of non-performing assets in the banking sector and exuded confidence that the top management will ensure to keep it at that level.