Public-sector Banks Required To Present Three-year Business Plans By March End

According to a report by a media house on 18 March, the Centre instructed Public-Sector Banks (PSBs) to submit their business plans until the fiscal year 2026-2027 (FY27) by the end of March. The proposed plans will undergo quarterly assessments by government-appointed directors on the banks' boards, as per an official source cited in the report.

These business plans are mandated to address strategies aimed at boosting low-cost deposits, enhancing capital, resolving non-performing assets (NPAs), strengthening cybersecurity and expanding financial outreach, the report outlined.

Earlier in the month, the finance ministry had directed PSBs to conduct a comprehensive review of their gold loan portfolios due to instances of non-compliance with regulatory norms.

The Department of Financial Services (DFS) urged banks to meticulously review the gold loan disbursements over the past two years, from 1 January 2022 to 31 January 2024, to ensure adherence to regulatory requirements and internal bank policies.

The directive from the government instructed PSBs to rectify any irregularities concerning collateral-free gold loan disbursement, fee and interest collection, closure of gold loan accounts and cash repayments.

As of December 2023, State Bank of India (SBI) held a gold loan portfolio worth Rs 30,881 crore, while Punjab National Bank's exposure in gold loans stood at Rs 5,315 crore. Bank of Baroda reported a gold loan portfolio of Rs 3,682 crore by the end of the third quarter of FY24.

Under RBI norms, banks and gold loan finance firms are permitted to lend only up to 75 per cent of the value of the jewelry. However, during the COVID-19 period, relaxation was provided to alleviate financial strain.

In August 2020, the RBI increased the permissible Loan to Value (LTV) ratio for loans secured by gold ornaments and jewelry for non-agricultural purposes from 75 per cent to 90 per cent. This relaxation was applicable until 31 March 2021.