The Finance Ministry has taken proactive steps to keep a tight rein on the performance of Public Sector Banks (PSBs) across India. With PSB’s market shares showing a continued decline, the ministry now aims to closely monitor the banks’ achievements on 16 Key Performance Indicators (KPIs). These KPIs span various departments at the branch, region, state, and national levels. The objective is to address the decreasing influence of PSBs in Indian banking.
Performance Monitoring of Public Sector Banks
The ministry’s primary goal is to enhance PSBs’ performance and mitigate the ongoing reduction of their market share. As of December 2018 end, the PSBs constituted 63% of the outstanding credit of scheduled commercial banks, a decrease from 67% at the end of June 2017. This downward trend is largely attributable to asset quality issues that these banks have been grappling with since 2015.
Private Banks and NBFCs Stepping In
In the backdrop of the PSBs’ diminishing market share, private banks have been gaining ground. Besides, Non-Banking Financial Companies (NBFCs) have also made significant inroads into the sector. They have been successful in attracting customers despite offering loans at higher interest rates, chiefly by borrowing funds from banks.
The 16 Key Performance Indicators
To arrest this slide and promote the health of the PSBs, the Finance Ministry has laid out 16 KPIs. These include areas such as credit for infrastructure, farm sector, blue economy, housing, MSMEs, Stand-Up India scheme, education, exports, green economy, cleanliness activities, and financial inclusion and women’s empowerment. Further, indicators related to direct benefit transfer, digital economy, ATM usage and performance, ease of living, and corporate social responsibility will also be under the scanner.
| KPIs Classification | Examples |
|---|---|
| Sector-specific | Infrastructure, Farming, Blue economy, Housing, MSMEs, Exports, Green economy |
| Schemes-centric | Stand-Up India scheme |
| Socially driven | Financial inclusion and women’s empowerment, Cleanliness activities, Corporate social responsibility |
| Technologically oriented | Digital economy, ATM usage and performance |
| Welfare focussed | Ease of living, Direct benefit transfer |
Action Plan to Improve Performance
The banks will be evaluated based on their performance in these areas, compared to an average derived from the data of 18 PSBs. If a bank is found to be lagging in any of these indicators, a specific action plan will be devised and implemented after comprehensive consultation at various levels. This is part of a broader strategy aimed at improving the overall performance of PSBs in the country.
