FinMin Urges Public Sector Banks to Enhance MSME and Agricultural Credit
The finance ministry has called on public sector banks (PSBs) to enhance their lending to micro, small, and medium enterprises (MSMEs) and the agriculture sector. This directive was issued during a recent performance review meeting led by Department of Financial Services Secretary M Nagaraju. The ministry emphasized the importance of balancing innovation with risk management while focusing on customer-centric banking practices.
During the meeting, Secretary Nagaraju highlighted the critical role that public sector banks play in supporting the MSME and agriculture sectors. He urged bank leaders to prioritize lending to these areas, which are vital for economic growth and job creation. The ministry’s statement underscored the need for banks to adopt a dual approach of prudence and innovation. This strategy aims to ensure that banks not only meet their financial targets but also contribute to the broader economic landscape by fostering inclusivity and accessibility in banking services.
The banks were encouraged to enhance their credit disbursement under various government initiatives, including the PM Surya Ghar Muft Bijli Yojana and PM Vidya Lakshmi Yojana. The emphasis was placed on expediting loan processing and providing support through business correspondents, which can help reach underserved communities more effectively.
Digital Banking and Cybersecurity
The meeting also addressed the advancements in digital banking, with PSBs presenting updates on their mobile applications and customer outreach efforts. Nagaraju stressed the importance of cybersecurity and operational resilience in the face of increasing digital transactions. He called for a balanced approach that promotes digital expansion while ensuring inclusivity for all customers.
Furthermore, the use of artificial intelligence and data analytics was encouraged to enhance customer experiences and improve lending efficiency. Banks were advised to adopt digital tools like BAANKNET to facilitate transparent resolutions and strengthen their early warning systems for potential risks.
Progress on Financial Inclusion Initiatives
The review covered the progress of various flagship financial inclusion schemes, such as the PM Jan Dhan Yojana and PM Mudra Yojana. Nagaraju urged banks to expand their outreach in aspirational and underserved districts, aligning with the government’s Aapki Poonji, Aapka Adhikar campaign. This initiative aims to ensure that financial services are accessible to all segments of society, particularly those in remote areas.
Additionally, banks were instructed to effectively implement the integrated unclaimed asset portal, which is designed to streamline the management of unclaimed assets and enhance transparency in the banking sector.
Asset Quality and Future Lending Directions
On the asset quality front, public sector banks reported a decline in gross non-performing assets (NPAs) to 2.30% and net NPAs to 0.45% as of September 2025. Recoveries have gained momentum, with the National Asset Reconstruction Company Limited acquiring bad loans worth Rs 1.62 lakh crore in the first half of FY26. This positive trend reflects the banks’ ongoing efforts to manage their asset quality effectively.
Looking ahead, the finance ministry expects PSBs to scale up lending to emerging sectors such as renewable energy, food processing, tourism, and data centers. This aligns with the government’s vision for a developed India by 2047. The ministry’s clear focus is on ensuring that growth is inclusive, digital, and sustainable, paving the way for a robust financial ecosystem that benefits all citizens.
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