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The government has directed state-owned banks to submit their business plans till 2026-27 by the end of this month, officials said, adding that these plans will be assessed on a quarterly basis by the government-nominated directors on the boards of the banks.

The business plans will cover strategies to increase low-cost deposits, raise capital, resolve bad loans, improve cybersecurity and undertake financial inclusion outreach, said a senior government official.

“In addition to the quarterly review by the government nominee, there will be mid-year and annual reviews by the finance ministry to assess the performance of the lenders and ensure corrective course correction,” said the official, who did not wish to be identified.

The government also wants lenders to build up long-term strategies to address the concerns raised by the regulator, Reserve Bank of India (RBI), on various issues such as outsourcing of critical services, including technology services, said a bank executive aware of the deliberations.

“In the past, the RBI has raised issues such as innovative methods used by financial institutions to conceal the real status of stressed loans and aggressive unsecured lending without back-testing slippages. We will be submitting our individual strategies on how to have a systemic approach to handle such issues,” the executive said on condition of anonymity.

Earlier this month, ET reported that the finance ministry had ordered state-run banks to review gold loan processes amid fears about risky debt given a rally in the price of the metal. In January 2024, finance minister Nirmala Sitharaman had asked state-run banks to put greater effort into making recoveries from wilful defaulters and accounts declared fraudulent. Lenders were also asked to step up the acquisition of stressed accounts by the government-sponsored National Asset Reconstruction Co. Ltd., Sitharaman also called for a performance review of counsel representing public sector banks (PSB) to ensure better legal outcomes.

Another banker said the government has been pushing state-run banks to collaborate on various initiatives, such as a common PSB cloud, common e-auction platform eBkray and a common agricultural collateral onboarding and monitoring platform. “The roadmap will also touch on these issues and the banks’ strategy to coordinate with other banks, security agencies and regulatory bodies,” the executive said.

  • Published On Mar 18, 2024 at 07:43 AM IST

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