Public Sector Bank Reforms

The 4R’s Strategy for PSBs:

The 4R’s Strategy (Recognition, Resolution, Recapitalization, and Reforms) was introduced to address the stress in the loan portfolios of Public Sector Banks (PSBs).

  1. Recognition:
    • Acknowledging the non-performing assets (NPAs) transparently.
    • Prior to 2015, stress in loan portfolios was hidden under Standard Restructured Assets (SRAs).
    • By Q3FY19, the gross NPAs increased, but SRAs were significantly reduced (from ₹3.93 lakh crore to ₹0.34 lakh crore).
    • PSBs also made provisions to absorb future losses, resulting in a higher Provision Coverage Ratio (PCR), which improved from 46% in FY15 to 68.9% by Q3-FY19.
  2. Resolution:
    • The Insolvency and Bankruptcy Code (IBC) was leveraged to restructure loans.
    • Recovery from NPAs was a focus, and the Insolvency Process allowed creditors to take control and resolve defaults.
    • Under reforms, PSBs implemented the Stressed Asset Management Verticals (SAMVs) to centralize management of large-value stressed assets.
    • PSBs recovered ₹2.87 lakh crore between 2015-2018 with a record recovery of ₹98,493 crore in FY19 (till Q3), marking a 100% growth from the previous year.
  3. Recapitalization:
    • The government infused capital into PSBs through plans like Indradhanush (₹70,000 crore) and ₹2.5 lakh crore recapitalization efforts, including market mobilization of ₹66,000 crore.
    • Total ₹3.14 lakh crore recapitalization was achieved from FY15 to FY19.
  4. Reforms:
    • The PSB Reforms Agenda was introduced to enhance governance, risk management, and transparency.
    • It included reforms such as deregistration of shell companies, freezing of dormant bank accounts, and improved regulatory frameworks.
    • Additionally, measures like collecting borrower passport details were introduced to reduce wilful defaults and improve monitoring.
    • The Fugitive Economic Offenders Act was enacted to address financial crimes involving defaulters fleeing from the country.

PSB Reforms: EASE Agenda (Enhanced Access & Service Excellence):

The PSB Reforms EASE Agenda launched in 2018 focuses on six core areas of transformation aimed at improving service delivery and internal governance within PSBs.

  1. Customer Responsiveness:
    • Aimed at making PSBs more customer-centric, with enhanced digital banking services like UPI, e-KYC, and AePS.
    • PSBs introduced platforms like psbloansin59minutes.com to expedite loan processing.
  2. Responsible Banking:
    • Focus on NPA resolution, credit quality, and responsible lending.
    • Implementation of SAMVs for dedicated management of stressed assets.
    • PSBs were encouraged to improve their credit appraisal mechanisms and risk management practices.
  3. Credit Off-take:
    • The agenda encourages an increase in the credit flow to boost economic activities, especially to MSMEs (Micro, Small, and Medium Enterprises).
  4. UdyamiMitra for MSMEs:
    • Supporting MSME sector growth by facilitating easier access to finance through initiatives like UdyamiMitra.
    • PM Vishwakarma Scheme: The PM Vishwakarma Scheme is a government initiative, fully funded by the Government of India, with an initial budget of ₹13,000 crore. It was launched on September 17, 2023, and will run for five years (up to 2027-28).
      • Key Objectives:
        • Improve the quality and reach of products and services made by artisans and craftspeople.
        • Integrate them into both domestic and global value chains, helping them expand their market access.
      • Focus Areas:
        • Initially, the scheme will cover 18 trades, providing benefits to artisans working in these fields.
  5. Deepening Financial Inclusion:
    • Expanding banking access through Jan-Dhan Accounts and Direct Benefit Transfers (DBT).
    • Increasing banking outlets to ensure that 96% of villages had access to banking services by February 2019.
  6. Digitalization and Developing Personnel for Brand PSB:
    • Increasing the availability of digital banking services, promoting online banking, and mobile-based transactions.
    • Improving employee skills to handle the new technology and digital services.

EASE Reforms Index:

The EASE Reforms Index tracks the progress of PSBs against a set of 140 performance metrics. These include:

  • Customer Satisfaction.
  • Digital Adoption.
  • Governance and Risk Management.
  • Financial Inclusion.

The goal of the Index is to ensure transparency and healthy competition among PSBs, encouraging them to learn from best practices.

Technological Improvements and Service Enhancements:

  1. Banking Services Digitalization:
    • PSBs embraced mobile and internet banking, enabling customers to access services like UPI, e-Sign, and AePS.
    • Significant strides were made in last-mile banking, especially through Bank Mitras and other digital platforms.
  2. NPA Recovery:
  3. Improvement in Loan Processing:
    • The introduction of psbloansin59minutes.com enabled faster processing of retail loans, with a 25% reduction in turnaround time in H1FY19.
  4. Customer Service Enhancements:
    • PSBs expanded services such as Braille-enabled ATMs for the differently-abled.
    • Increased access to regional languages in call centers and mobile banking apps.

Key Results & Achievements:

  • PMJDY Accounts: Over 34 crore accounts were opened under the Pradhan Mantri Jan Dhan Yojana.
  • Direct Benefit Transfers: ₹6.28 lakh crore were transferred via DBT schemes.
  • Financial Inclusion: PSBs extended banking access to 96% of villages that previously lacked access.
  • NPA Recovery: PSBs achieved a record ₹98,493 crore recovery from NPAs in FY19 (till Q3).
  • Improvement in Governance: Reforms like separation of CMD roles and empowering CEOs for decision-making in NPAs and wilful defaults.

Awareness About RBI Guidelines

Vigilance