India needs 4-5 more large banks of SBI’s size: Finance minister Nirmala Sitharaman

The minister asked the IBA to conduct a digitised mapping of bank branches in each district of the country. (File)

Finance minister Nirmala Sitharaman said on Sunday India requires at least 4-5 more large banks like State Bank of India (SBI) to support the growing credit appetite of a fast-recuperating economy in the post-Covid world.

Addressing the 74th annual general meeting of the Indian Banks’ Association (IBA) in Mumbai, the minister said the economy is on a reset mode after the devastation caused by the pandemic. Banks, being the backbone of the financial system, would have to continue to play a critical role in supporting the economy’s resurgence, the minister said. Non-food credit growth remained far from satisfaction and stood at 6.2% in July 2021, against 6.4% a year earlier.

Already, the wide-scale consolidation exercise in the public-sector banking space in recent years has created some large lenders with strong balance-sheet to lend to big projects. Thanks to the amalgamation exercise, the number of state-run banks has come down from 27 in 2017 to 12 now.

She also asked lenders to firm up models to better focus on exporters.

“Be nimble, agile, adaptive, it is a must for attaining $2-trillion export (both goods and services) target for 2030,” she told bankers.

As for funding infrastructure projects, the minister said the proposed development financial institution is coming up soon.

Banking activities need to be scaled up substantially to ensure all business centres in the country are covered with physical or digital banking presence.

In the post-pandemic world, banks need to change the way they undertake their businesses. Since digitisation has changed the way of doing businesses, banks will have to innovate and keep pace with evolving technology, she said.

The minister asked the IBA to conduct a digitised mapping of bank branches in each district of the country. This would help identify the areas that need greater banking presence.

Sitharaman said: “Not necessary to have physical banking presence everywhere. The country’s optic fibre network has covered two-third of about 7.5 lakh panchayats. This could be used to deliver banking services in unconnected areas as well.”

“If we look at post-Covid scenario, India’s banking contour will have to be very unique to India, where there has been an extremely successful adoption of digitization. While banks in many countries could not reach out to their clients during the pandemic, the level of digitization of Indian banks helped us to transfer money to small, medium and big account holders through DBT and digital mechanisms,” she said.

The minister appreciated the efforts of the public-sector banks in implementing the amalgamation exercise even during the pandemic period and completing it without causing any inconvenience to customers.