Public sector banks (PSBs) in India are experiencing a decline in savings account deposits at a faster rate than private banks, according to Banking Secretary Vivek Joshi.
The flow of funds into mutual funds is cited as a significant factor contributing to this trend, posing a worry and challenge for the banking sector.
Joshi emphasizes the concern over the slow growth of current accounts and savings accounts (CASA) for PSBs, with deposit growth around 13% compared to advances growth at approximately 16%.
Joshi further highlights the pressure on the net interest margins of government-owned banks. Mutual funds play a role in diverting savings from banks, affecting PSBs’ CASA performance.
To address challenges, the government is seeking exemptions for PSBs under the 75% minimum public shareholding norm until August 2025.
While the State Bank of India (SBI) holds around 56% by the government, other PSBs face higher government shareholding.
Financial inclusion, non-performing asset (NPA) recovery, and cybersecurity remain significant focus areas for PSBs. Joshi underscores the importance of schemes like Prime Minister Jan Dhan, Suraksha Bima Yojana, and new initiatives like PMSVANidhi for street vendors and PM Vishwakarma for artisans.
Loan recoveries amounted to ₹61,000 crore in FY24, with a focus on improving recovery processes and maintaining awareness of NPAs even after technical write-offs.
The government aims to navigate these challenges and reinforce the stability and growth of PSBs in the evolving banking landscape.