MUMBAI: If India needs to become a $5 trillion economy, the Public Sector Banks (PSB) need special attention, noted the Economic Survey 2019-20 tabled in Parliament on Friday.
The PSBs account for 70 per cent of market share in Indian banking; the onus of supporting the Indian economy and fostering its economic development falls on them, it pointed out.
The survey observed that anaemic credit growth has impacted economic growth.
“This needs to be remedied because the economy needs PSBs to perform to their fullest potential and support economic growth rather than pullback lending, which has a detrimental effect on growth and welfare,” it said.
Showing concern over the poor health of PSBs, it said, “A large economy needs an efficient banking sector to support its growth. Yet, credit growth among PSBs has declined significantly since 2013 and has also been anaemic since 2016.”
PSB credit growth essentially fell in single digits after 2014, ending up at 4.03 per cent in 2019 against 15-28 per cent from 2010-2013.
The paper emphasised that “if Indian banks were proportionately large in relation to the size of the Indian economy, we should have at least six banks in the global top 100. Similarly, India becoming a $5 trillion economy will require at least eight Indian banks to be large enough to belong in the top 100 globally.”
According to the survey, the state of the banking sector in India, therefore, needs urgent attention. In 2019, PSBs’ collective loss, largely due to bad loans, amounted to over Rs 66,000 crore.
PSBs account for 85 per cent of reported bank frauds while their gross non- performing assets equal Rs 7.4 lakh crore, which is more than 150 per cent of the total infrastructure spend in 2019, it said.
Survey bats for fintech in banking functions
The survey suggests use of FinTech across all banking functions and employee stock ownership across all levels to enhance efficiencies in PSBs.
These will make PSBs more efficient so they are able to adeptly support the nation in its march towards being a $5 trillion economy.