 "Public sector banks setting benchmarks for BFSI sector, says M Nagaraju")
Public sector banks (PSBs) in India are setting remarkable benchmarks for the country’s banking, financial services, and insurance (BFSI) sector, said M Nagaraju, Secretary, Dept of Financial Services, Ministry of Finance.
In a conversation with Business Standard Editorial Director AK Bhattacharya at the Business Standard BFSI Insight Summit 2025 in Mumbai, Nagaraju said, “Public sector banks in this nation are setting great benchmarks for BFSI sector,” while highlighting that the financial sector is witnessing its strongest period ever.
“I think we all agree when we assess that India’s financial sector is at the pinkest possible period of time in history. Public sector banks made highest profit during the last financial year, and they also paid the highest dividends, including the Scheduled Commercial Banks,” he said.
Strong fundamentals despite global flux
Nagaraju said the health of India’s banking system remains robust, even amid global economic uncertainty. “Now, there is a lot of flux and uncertainty. Despite these uncertainties, our economy is doing very well. We don't face much sharper flow or outflow of the capital,” he observed.
Highlighting the sector’s resilience, he said, scheduled commercial banks recorded their highest profit last year. “Net NPA of public sector banks stood at around 0.52 per cent in FY25, while gross NPA was 2.2 per cent during the period. Public sector banks are currently at their most innovative. Balance sheets of private sector banks are also at their strongest ever now. These reflect the strong health of the financial sector despite global uncertainties,” he said.
Nagaraju also noted that India’s Provision Coverage Ratio (PCR) stood at a strong 94 per cent, adding, “We have one of the strongest performances by PSU Banks now. Despite the uncertainties, Indian economy is doing good. There won’t be much impact of global financial volatility; we are stable and consistent.”
Four key challenges for banks
Speaking at the event, Nagaraju outlined four major challenges for the banking sector. “One is ensuring that the current strength and stability should not lead us into complacency in our due diligence, great analysis and being focused on the core job of banking. That's the fundamental principle,” he said.
The second key challenge, he said, is strengthening credit to core sectors, agriculture, and MSMEs. “Enhanced lending to core sector, agriculture and MSMEs. MSME growth is good, but we need to do more,” he said.
Addressing public service quality, Nagaraju mentioned the importance of grievance redressal. “Public reaching out to banks must be treated with dignity. Banks must focus on redressal and providing world class services to citizens coming to bank branches.”
Cybersecurity, according to him, remains a top priority. “Banks have to always stay one step ahead of cyber security attackers both inside and outside the country. Therefore, they have to invest a substantial amount of thinking, knowledge and resources for wading off the cyber security threats,” he suggested.
Need for more banks for financial inclusion
On the question of why there are fewer banks in the system, Nagaraju said India needs more banks to expand access and inclusion. “We need more banks for better financial inclusion. Now, how do we achieve 100 per cent financial inclusion unless we have more bank branches meeting the diverse needs of both people as well as firms? That's not possible. We require niche banks meeting requirements of niche segments of population,” he said.
He also pointed to “some structural bottlenecks for insurance penetration in the country”, suggesting that greater diversification in banking and insurance services will be key to deepening financial inclusion. Catch all coverage of the Business Standard BFSI Summit 2025 Day 1 here.