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Indian Express
11 hours ago
- Business
- Indian Express
Odisha curbs on HDFC, ICICI and Axis Bank: Pvt lenders under scanner for poor show in govt schemes
The involvement of private sector banks in Central government welfare schemes has come under scrutiny, as the Odisha government has removed three major private lenders — HDFC Bank, ICICI Bank, and Axis Bank — from its panel of banks authorised to handle the business and deposits of state departments and government-supported bodies such as universities, directorates, and state units. According to a letter issued by Saswata Mishra, Principal Secretary of the Finance Department, Odisha government, the decision was driven by the banks' 'consistently poor performance' in key flagship schemes over the past two financial years, along with 'generally unsatisfactory banking parameters'. 'All these organisations are hereby directed to immediately close their savings bank, current and other running accounts maintained in these three banks and transfer the account balance to any new or existing account opened or maintained in any other empanelled bank,' the letter said. However, fixed deposits/term deposits currently maintained in these three banks should not be closed now as it may lead to loss of interest due to pre-mature closure. 'But, on maturity of these deposits, the entire deposit along with accrued interest should be transferred to other empanelled banks,' the letter said. When contacted over phone and email, HDFC Bank, ICICI Bank and Axis Bank did not comment on the Odisha government decision. The government has several times pulled up private banks for their low share in extending the government's financial schemes for groups like farmers, businesses and street vendors. State governments often perceive that private banks primarily serve the affluent segments of society — those less likely to default and more likely to maintain substantial deposits. While private banks are part of the machinery that delivers Central government social welfare schemes, they often trail their public sector counterparts in execution. The hesitation is not without reason. 'Despite sovereign guarantees backing many of these schemes, private lenders remain wary —concerned about the recoverability of loans extended to beneficiaries,' said an official of a bank. Bankers also complain about the political angle in implementing Central welfare schemes with some states not showing much interest, alleging political bias. West Bengal, for example, has taken a strong stance against several key central government welfare schemes, citing concerns over autonomy, implementation and perceived political bias. Much of this lending falls under the priority sector, where margins are thin and defaults can quickly tip the balance sheet. For private banks, the risk of such loans turning into non-performing assets (NPAs) looms large. As a result, their participation tends to be more cautious, leading to slower rollout and patchier implementation compared to their public sector peers. The government, however, issued a clarification on June 24, saying the curbs will not be applicable for the single nodal agency bank accounts meant to receive and manage funds for centrally sponsored schemes, payment aggregator/payment gateway bank accounts, agency bank accounts (for collection of state government dues) and NPS/pension trustee bank accounts currently maintained in the three banks. 'While the above-mentioned bank accounts of state government organisations shall continue in these three banks, new accounts for these purposes shall not be opened in these three banks till further orders,' reads the June 24 order. A senior Odisha government official said the three banks were not up to the mark when it came to priority sector lending, such as sanctioning farm loans and finances for the MSME sector in the past two years. The Central government has launched several flagship schemes aimed at inclusive growth, financial empowerment, and social welfare across sectors such as health, housing, agriculture, and entrepreneurship. Among the most impactful is the Pradhan Mantri Jan Dhan Yojana (PMJDY), which focuses on financial inclusion by providing zero-balance bank accounts, RuPay cards, and insurance coverage to millions of unbanked citizens. In the housing sector, the Pradhan Mantri Awas Yojana (PMAY) targets 'Housing for All' by offering interest subsidies on home loans to economically weaker sections in both urban and rural areas. For farmers, the government runs the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), offering an amount annually in direct income support, and the Pradhan Mantri Fasal Bima Yojana (PMFBY), which provides crop insurance to protect against yield losses due to natural calamities. To support small and micro enterprises, the Pradhan Mantri Mudra Yojana (PMMY) offers collateral-free loans up to Rs 10 lakh. The Stand-Up India scheme furthers this effort by extending loans to SC/ST and women entrepreneurs. PM Street Vendor's AtmaNirbhar Nidhi (PM SVANidhi) supports street vendors with working capital loans and incentives for digital transactions. Healthcare initiatives are anchored by the Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (PMJAY), which offers health insurance coverage of Rs 5 lakh per family per year for secondary and tertiary hospital care. The Atal Pension Yojana (APY) promotes long-term financial security for workers in the unorganized sector by providing a government-backed pension. These schemes are part of the broader vision of empowering every citizen and building a resilient, inclusive economy. While public sector banks play a key role in implementing these programs, private banks are also expected to contribute, though their participation has often lagged.
Time of India
4 days ago
- Business
- Time of India
Odisha removes HDFC Bank, ICICI Bank, and Axis Bank as authorised banks for govt businesses
Odisha government issued an official directive removing HDFC Bank , ICICI Bank , and Axis Bank from the list of empanelled banks authorised to handle the business and deposits of the State Government and its supported organisations. The letter reviewed by ET said that their action on banks is due to 'persisting poor performance' in some flagship government schemes over the last two financial years. The letter signed by the Principal Secretary to the Government, Saswata Mishra, stated the decision was also due to 'discouraging general banking parameters' by these three banks without elaborating it further. The letter also stated that if the performance of these three banks improves during the current financial year, the state government may consider including them in the list of empanelled banks. ICICI Bank, HDFC Bank and Axis Bank did not respond to requests for comments. Odisha's share of total deposits is Rs 5.64 lakh crore or 2.4% as on March 31, 2025. 'This will not impact the banks' performance given the small share of the state in total deposits although it may affect their reputation if it is not mended soon,' said an analyst. The state government also warned that other poorly performing banks could face a similar fate. 'Depending on performance (achievement in flagship government schemes and general banking performance parameters such as CDR, ACP achievement, etc.), poorly performing banks shall be removed from the empanelled list of banks and well-performing banks will be added to the empanelled list.' CDR stands for credit deposit ratio and ACP is an annual credit plan. The state government's letter dated June 21 stated that State Government departments, directorates, heads of departments, establishments, agencies, PSUs, societies, universities, and other affiliated organisations must immediately close their savings, current, and other running accounts with these three banks and transfer the balances to other empanelled banks. The letter stated that term deposits currently held in these banks should not be prematurely closed to avoid loss of interest. Upon maturity, these deposits must be transferred to other empanelled banks. Banks in Odisha state attracted term deposits of Rs 3.21 lakh crore as of March 31, 2025, according to data published by the RBI. While this is lower than Kerala (Rs 3.48 lakh crore), it is higher than Andhra Pradesh (Rs 2.44 lakh crore).
