The Union government on Friday urged bankers to increase lending to the industries segment given the multiplier benefits it offers for the country’s economic growth.
The Department of Financial Services (DFS) of the Union Finance Ministry is also mulling to conduct a customer service survey for banks and rank banks on the same, a senior official said.
DFS Secretary Sanjay Malhotra said that in the last decade the share of industries in the overall credit of banks has declined by 16 percentage points to 26 percent, and the same need to increase.
He said the maximum credit growth has been in the retail segment over the years, and banks have been focusing on the same.
In addition, there have been changes such as greater reliance on corporate bonds and a structural shift in the economy towards the service sector, he said.
A few years ago, policy makers convinced banks not to lend so much to the industrial segment given the experience of heavy lending, and rather to focus on retail credit to serve the priority of financial inclusion.
“We have to bring all the segments. We have noticed that over the years, credit to industries has gone down,” Malhotra said in an address to bankers at the annual general meeting of lobby Indian Banks Association of the industry here.
Listing the data on the decline in the composition of credit to industry in the overall pie over the last decade, he said, “We need to get that space back, we need to support it (credit to industry) because of the enormous multiplier effect that credit investments in industries have on the economy.”
In recent quarters, the industry has undertaken a massive deleveraging exercise courtesy of the high profits it has made during the pandemic, rather than using the space for new investments. Experts say the lack of clarity on demand made them go for it, even as RBI surveys have pointed to an increase in capacity utilization rates.
Malhotra, who oversees the government’s holdings in state-owned financial institutions, also urged private sector lenders to pull up their socks and help the government achieve its financial inclusion policy goals.
He said private sector banks contribute only 3% to accounts opened under Prime Minister Jan Dhan Yojana, 4% to Pradhan Mantri Jeevan Jyoti Bima Yojana and Prime Minister Suraksha Bima Yojana, and 7% each to Atal Pension Yojana and Kisan Credit Card.