Union Finance Minister Nirmala Sitharaman has called on public sector banks (PSBs) to significantly ramp up lending to Micro, Small and Medium Enterprises (MSMEs), as part of a broader strategy to stimulate economic growth and deepen financial inclusion. The directive came during the annual performance review meeting held in New Delhi on June 27, where Sitharaman met with top executives of PSBs and senior officials from the Department of Financial Services.
The Finance Minister emphasized that banks must aim for a credit growth rate surpassing last year’s performance, particularly in the MSME sector, which she described as the backbone of the Indian economy. She urged banks to proactively implement the New Credit Assessment Model for MSMEs, launched in March 2025, under which ₹60,000 crore in loans have already been sanctioned to nearly two lakh enterprises.
Sitharaman also highlighted the need for improved deposit mobilisation, especially in semi-urban and rural areas, to support sustained credit expansion. She directed banks to undertake special outreach drives, strengthen their Business Correspondent networks, and ensure last-mile access to financial services.
In addition to MSME lending, the Finance Minister stressed the importance of enhancing customer service, simplifying digital platforms, and ensuring multilingual support. She called for faster grievance redressal and cleaner, more accessible physical branches, particularly in underserved regions such as the North-east.
The review also noted a marked improvement in the financial health of PSBs. Net non-performing assets (NPAs) have declined to 0.52% as of March 2025, while total business has grown from ₹203 lakh crore in FY23 to ₹251 lakh crore in FY25. Net profits rose to ₹1.78 lakh crore, and dividend payouts increased to ₹34,990 crore.
Sitharaman concluded by urging banks to align their strategies with national priorities, including green lending, financial inclusion, and support for indigenous innovation. She reiterated that no viable small business should be denied access to credit, and called for aggressive lending in light of recent interest rate cuts by the Reserve Bank of India.
The meeting signals the government’s continued focus on empowering MSMEs and ensuring that the banking sector plays a pivotal role in India’s economic trajectory.
