Why public sector banks are crucial in the war against coronavirus

The role of public sector banks is going to be extremely critical in Modi government’s battle against the Covid-19 pandemic as most of the relief measures announced under Rs 1.7 lakh crore PM Garib Kalyan scheme will be implemented through them.

Hyderabad: Finance Minister Nirmala Sitharaman Saturday held extensive discussions with the top brass of public and private sector banks to ensure that the common man does not face any problems in accessing money during the period of lockdown.

She also directed them to ensure that during the 21-day period money is available at all level, bank branches, ATMs including banking correspondents that serve people in the hinterland and rural areas.

However, in addition to ensuring cash flow, the role of public sector banks is going to be extremely critical in Modi government’s battle against the Covid-19 pandemic as most of the relief measures announced under Rs 1.7 lakh crore PM Garib Kalyan scheme will be implemented through them.

Mindful of the important role played by public sector banks, Nirmala Sitharaman also encouraged them to keep up their efforts while acknowledging their contribution during the conference calls with their top brass on Saturday.

Rollout of Garib Kalyan Scheme depends on govt banks

The government machinery depends on public sector banks for a successful rollout of Rs 1.7 lakh crore economic relief package over the next three months. The package is aimed at reducing the pain of the country’s nearly two-third of the population (80 crore people) that is looking at an uncertain future due to the adverse economic impact of the virus that infected nearly thousand people and has claimed 25 lives so far.

Role of public sector banks is crucial for the success of the nationwide lockdown as cash transfers announced by the government under Prime Minister Garib Kalyan Yojana will be routed through government banks under the direct transfer of benefits (DBT) scheme.

“The government will rely on public sector banks to transfer money to over 20 crore PMJDY account holders as 95% of PMJDY accounts are with us,” a senior public sector bank official told ETV Bharat requesting not to be named.

What could be routed through public sector banks

There are over 38.28 crore PMJDY accounts in the country with an aggregate deposit of over Rs 1.18 lakh crore. 53% of these accounts belong to women that will receive Rs 500 per month for the next three months under the government scheme to provide disposable cash in their hands during a prolonged lockdown period.

In addition to this, one time ex-gratia payment of Rs 1,000 to 3 crore poor senior citizens, widows and disabled persons will also be transferred through banks.

The government will also transfer first installment of Rs 2,000 to over 8.7 crore beneficiary farmers of PM Kisan Samman Nidhi scheme early next month through public sector banks.

Vast network of PSU banks to help fight against Covid-19

In order to implement PM Garib Kalyan package, Nirmala Sitharaman will have to rely on the vast network of public sector banks as there are more than 87,000 branches of public sector banks across the country. And one third of them (nearly 29,000 branches) are located in rural areas. In addition to this, public sector banks have 1.34 lakh ATMs and 20% (over 27,000) of them are located in rural areas.

In comparison with that, the coverage of private banks that have over 32,000 branches and 69,000 ATMs in the country was way behind government banks, just 6,846 or 21% branches and 5,759 or 8% of their total network of 69,000 ATMs are located in rural areas.

In addition to this, public and private sector banks have nearly 6 lakh banking correspondents (BCs) to provide last mile financial services like withdrawal and deposit services across 6 lakh villages of the country. Here also, public sector bank will play the lead role as nearly 70% of the total business correspondents belong to them.

Relief package crucial for success of lockdown

PM Garib Kalyan Scheme envisages cash transfers in addition to providing additional food-grain free of cost to insulate nearly 80 crore people from the adverse impact of the lockdown.

The scheme entails ensuring availability of three basic things - food, fuel and disposable cash in the hands of poor people for a period of three months as the government braces for a prolonged lockdown if the situation doesn’t improve within the next three weeks.

However, the lockdown measures cannot succeed without meeting the basic requirement of a vast majority of the country’s poor as they might defy prohibitory orders if the relief announced by the government does not reach them at the earliest.

Though the government has a robust network in place, in the form of a trinity of JAM (Jan Dhan Accounts that are linked with Aadhaar and Mobile), timely release of funds through a vast network of public sector banks and their banking correspondents and its eventual delivery to the intended beneficiary will be crucial in the country’s battle against coronavirus.

(Article by Krishnanand Tripathi)