PUNE: Finance minister Nirmala Sitharaman has asked banks especially those under her watch to further strengthen their balance sheets so that they can fund more to the high cash-burning infrastructure sector.
The FM's comment comes at a time when the banking regulator is nudging banks to move away from infra lending by deepening the bond markets. And, corporates have been borrowing more from the debt market than from banks in recent years taking the corporate bonds outstanding to Rs 53.6 trillion as of March 2025 up from Rs 17.3 trillion in March 2015, according to data released by the Securities and Exchange Board of India (SEBI). The banks' total outstanding corporate loan book is only around Rs 80 trillion or about 30% of the Rs 253 trillion credit book.
The FM also asked state-run banks to increase their collaboration with non-banks to increase their co-lending books.
While addressing the 91st foundation of the state-run Bank of Maharashtra here Thursday, she said from being hit by the twin balance sheet problem of the fiscal 2013 and 2014 today the economy has the twin balance sheet advantage by way to stronger banks with stronger balance sheets and highly deleveraged corporates who are said to be sitting on a cash pile of Rs 13.5 trillion.
“Financial institutions play a crucial role in the national infrastructure building and the efforts which go towards it particularly for MSME enterprises. So as our economy grows so does the demand for credit and innovative financial products and capital expenditure. So financial institutions must maintain strong balance sheets to fund significant investments in infrastructure, and into industry,” Sitharaman said.
The minister further said; “..with uncertainty remaining a defining feature of the global landscape the role of banks becomes even more critical. Not just as custodians of savings but also engines of growth providing the finance and support that businesses and entrepreneurs need to navigate for volatility, seize the opportunity and also drive innovation.”
Urging banks to lend more through the co-lending model, she said “a deeper institutionalized collaboration between NBFCs and public sector banks are required. And public sector banks are needed to engage more proactively with NBFCs on co-lending particularly for priority sector lending. Because such partnerships help enhance credit flow to the underserved sectors ensuring that funds reach the ultimate beneficiaries at an affordable cost.”
Lauding Bank of Maharashtra for its industry leading performance on all key metrics for the past many years, she said the Pune based bank “consistently stands out as a top performer among public sector banks in managing both gross and net NPAs and all other key ratios such as RoA, Casa, cost to income ratios.
“Bank of Maharashtra’s return on assets is the highest among state run banks at 1.8% in FY25, which is way ahead of other public sector banks which averages at 1.1%. So is its cost to income ratio at 38.4%, which is not only the lowest among the public sector banks, the average among public sector banks is 50.1%, but what’s more important is that 40% or below 40% is regarded as an excellent benchmark. Similarly, it’s Casa at 53.3% is the highest among the public sector banks, where the average is 38.8%. On asset quality too the bank shines with gross NPA profits f 1.74% and net NPA at 0.18% as of June 2025.