MUMBAI: It is time to re-evluate the objectives of the public sector banks (PSBs) and their role in the Indian economy as government capital infusion has largely gone in to fill the losses and failed to contribute to credit growth, India Ratings and Research said in a paper on recapitalization of PSBs.The objectives of Indradhanush scheme has been diluted as recapitalization has not been based on performance.
The percentage of incremental credit growth in recent years of PSBs as well as the fall in overall market share of PSBs shows that it isn’t fulfilling the nationalization mandate of financial inclusion, the paper said. “The market share of PSBs fell to 46.5 per cent in FY19 from 60.9 per cent in FY14. More importantly, in terms of incremental credit, the share of PSBs has been 26.2 per cent over FY14-FY19,” it pointed out.
Priority sector lending, a key focus area for PSBs have also seen lower compared to their share in the banking system. Private sector has been able to give more credit to agriculture, MSMEs compared to PSBs in the last few years, the report noted.