In the last two years, PSBs started offering 10 percent credit facility in emergency times, which made every bank customer, be it MSME or individual, maintain their liquidity requirements. Later, RBI came up with measures to support the sector by pumping in Rs 12 lakh crore and lowering interest rates. As a result, the transmission of interest rates was much faster. As a result, depositors will have to bear lower interest in the national interest of revival and preserving the economy. Atmanirbhar Bharat was a fantastic initiative with ECLGS, PLI, etc.
JAM has benefited during the pandemic times to ensure funds are transferred under direct benefit transfer. Corporates have raised more than Rs 10 lakh crore in the last two years due to favourable conditions around borrowing.
Central Bank gave funding to all India Financial Institutions for onward lending. So, in a way, immediate threat to the survival of SMEs, small borrowers were averted due to initiatives like moratorium, the response by government and scheduled commercial banks.
The stress in PSU Banks has been eased off, and the books are cleansed in the last two years primarily due to the efforts taken sometime before that. PSU Banks have learned from lending done over the years, which was to be done by DFIs.
NPAs have come down significantly, and if the trend continues, it will reflect in their market valuation. New-generation banks’ unsecured loan and retail focus except housing need to be watched. Employment levels have improved and lost income is getting corrected. Therefore, this risk is reduced to a lot extent.
RBI estimates GDP growth at 9.5 percent, the stress in banks’ books is relatively under control.
PSU Banks have lost the edge over private banks in digital technology is a matter of perception. However, PSU Banks have been adopting emerging technologies. For example, SBI is hiring a lot of technology professionals. The way they have done YONO is a testament that PSU banks are not lagging in digital experience. NPCI has also delivered modern products helping customers get a better experience and seamless payments.
The rate of revival and economic recovery is on the cards, and the certainty of 9.5 percent to double-digit economic growth is bright. PSU Bank privatisation is in line, and few strategic investments will remain. If the trends continue, then new investments and capital expansion will continue.
Banks are financially strong and resilient, while NBFCs are seeing some stress, and RBI is tightening the supervision of NBFCs. These regulatory changes for NBFCs could lead to an increase in NPAs, but they have gone through bad times but are now financially stronger. So there will be level-based supervision in the future, and the segment will come out stronger with better recovery, and their house is in order.