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NEW DELHI: In the wake of the HDFC-HDFC Bank merger, finance minister Nirmala Sitharaman on Thursday instructed the chiefs of public sector banks to focus on mopping up deposits at a time when the state-run players have lost market share.
A presentation by the department of financial services for the FM’s meeting with bank CEOs had flagged the prospect of deposits coming under pressure due to the merger of HDFC. Similarly, the government was of the view that the country’s largest private lender will also tap HDFC customers for loans, sources familiar with the deliberations told TOI.
HDFC’s merger with HDFC Bank is expected to cause a major disruption in deposit mobilisation as well as credit to small businesses. The merged entity has to extend close to Rs 90,000 crore of loans to the priority sector because of its expanded balance sheet. The merger will also result in advances outstripping deposits by over Rs 1 lakh crore, which will put pressure on the bank to raise more deposits. The loss in the share of the overall pie in the lending and low-cost current and savings bank account deposit base was identified as a challenge in the presentation (see graphic).
At the meeting, the FM also asked the banks to push credit to vendors, focus on rural and farm credit under the priority sector targets. Days after PM Narendra Modi raised concern over the implementation of PMSVANidhi by the ministry of housing and urban affairs, Sitharaman has asked her deputy Bhagwant Karad to lead a special drive for expanding the coverage, in partnership with urban local bodies. By August-end, Karad will visit different regions of the country for the special outreach.
The FM asked banks to “meet the targets” for the scheme. Although launched in 2020 as part of the Atma Nirbhar Bharat Package to help street vendors hit by the lockdown, banks just crossed the 50 lakh target. So far, 52.3 lakh loans have been sanctioned, with the amount adding up to Rs 6,730 crore.
The focus on street vendors comes ahead of crucial state and general elections, with states such as Rajasthan due to go to polls later this year seen to be among laggards. Even the thrust being given to the priority sector – where 40% of all bank loans need to flow – is seen as a pre-poll push.
Although the overall lending level is achieved, sector-specific targets, especially in the case of MSMEs, are missed. For instance, during the last financial year, there was a 0.7% shortfall in the 7.5% “sub-target” for micro enterprises, although the gap was almost 1% in 2021-22.
A presentation by the department of financial services for the FM’s meeting with bank CEOs had flagged the prospect of deposits coming under pressure due to the merger of HDFC. Similarly, the government was of the view that the country’s largest private lender will also tap HDFC customers for loans, sources familiar with the deliberations told TOI.
HDFC’s merger with HDFC Bank is expected to cause a major disruption in deposit mobilisation as well as credit to small businesses. The merged entity has to extend close to Rs 90,000 crore of loans to the priority sector because of its expanded balance sheet. The merger will also result in advances outstripping deposits by over Rs 1 lakh crore, which will put pressure on the bank to raise more deposits. The loss in the share of the overall pie in the lending and low-cost current and savings bank account deposit base was identified as a challenge in the presentation (see graphic).
At the meeting, the FM also asked the banks to push credit to vendors, focus on rural and farm credit under the priority sector targets. Days after PM Narendra Modi raised concern over the implementation of PMSVANidhi by the ministry of housing and urban affairs, Sitharaman has asked her deputy Bhagwant Karad to lead a special drive for expanding the coverage, in partnership with urban local bodies. By August-end, Karad will visit different regions of the country for the special outreach.
The FM asked banks to “meet the targets” for the scheme. Although launched in 2020 as part of the Atma Nirbhar Bharat Package to help street vendors hit by the lockdown, banks just crossed the 50 lakh target. So far, 52.3 lakh loans have been sanctioned, with the amount adding up to Rs 6,730 crore.
The focus on street vendors comes ahead of crucial state and general elections, with states such as Rajasthan due to go to polls later this year seen to be among laggards. Even the thrust being given to the priority sector – where 40% of all bank loans need to flow – is seen as a pre-poll push.
Although the overall lending level is achieved, sector-specific targets, especially in the case of MSMEs, are missed. For instance, during the last financial year, there was a 0.7% shortfall in the 7.5% “sub-target” for micro enterprises, although the gap was almost 1% in 2021-22.
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