Finance Ministry Urges PSBs To Chart New Route Through Fintech Partnerships & Co-Lending

To create new opportunities for public sector banks (PSBs), the finance ministry has asked them to explore fintech partnership and co-lending opportunities. The ministry also asked the lenders to focus on technology and data analytics to push their lending.

During a performance review meeting that was held recently, the ministry also asked the public sector lenders to increase their focus on cybersecurity and IT to keep a check on frauds, as per a PTI report. 

At a time when the economy is facing headwinds due to several geopolitical factors such as Russia-Ukraine war, the banks were also asked to sanction loans for productive sectors to fast-track the revival.

In addition, the ministry asked banks to expedite non-performing assets (NPAs) resolution, as well as focus on the recovery of bad loans.

Considerably, all PSBs clocked profit in the second financial year in a row, the report added.  In FY21, the collective profit of 12 state-owned banks stood at INR 31,820 cr. With more than a 2x growth, their net profit reached INR 66,539 Cr in FY22.

While the banks were running in loss during FY16 to FY20, the government undertook a comprehensive 4Rs strategy including recognition of NPAs transparently, resolution and recovery of value from stressed accounts, recapitalisation of PSBs, and reforms in PSBs.

It must be noted that the Reserve Bank of India (RBI) reportedly issued a notification to non-bank fintech players recently saying that prepaid payment instruments (PPIs) cannot be loaded with credit lines. The notification has caused distress among fintech players as many of the fintech startups have been banking on lending and BNPL as a feature to attract users. 

As per an Inc42 report, India’s fintech opportunity in India is projected to reach $1.3 Tn by 2025, growing at a CAGR of 31%. Currently, India has 21 fintech unicorns and more than 4.2K+ active fintech startups.