Public sector banks (PSBs) will identify one “champion sector” in their business plans, to expand significant presence in it by developing specific sector capabilities, said officials. The lenders will also look to design tailored products for segment-specific lending and build internal capacities such as stress testing and early warning signals, they said. “We are discussing these metrics with PSBs as part of their business roadmap till 2026-27,” said one of the officials, who did not wish to be identified.
This initiative is part of the Viksit Bharat (developed nation) strategy for PSBs, which includes onboarding sector-specific advisors and developing credit underwriting models to expedite loan approvals.
The move seeks to complement the government’s efforts under the Production Linked Incentive scheme that seeks to develop manufacturing capabilities in select identified areas. “Banks will focus on non-traditional sectors and collaborate to leverage the expertise developed among them,” said another official.
The plan includes strategies to increase low-cost deposits, raise capital, resolve bad loans, improve cybersecurity and undertake financial inclusion outreach. These measures are part of the Enhanced Access and Service Excellence reform version 7.0, under which banks will be assessed on various parameters. A bank executive said that another focus area in this financial year will be to improve credit to medium and small businesses. “Lenders will use analytics-driven scorecards for faster loan sanctions, end-to-end automation and improved risk management,” the executive said on condition of anonymity, adding that under the plan, PSBs will look at both customer retention and getting new clients onboard.
While most PSBs have reported profits for the last quarter of 2023-24, there are concerns that a decline in credit growth may impact profit margins.
Earlier this month, rating agency ICRA revised its outlook for the Indian banking sector to stable’ from ‘positive’, citing moderation in credit growth and profitability due to a decline in interest margins.
According to the rating agency, a larger proportion of corporate advances helped the public sector banks report better performance on slippages than the private sector ones, which have a sharper focus on retail and small business loans.
