PSBs should follow transparent NPA recognition norms, pursue risk mgmt: FM
New Delhi, July 6, 2023
Finance Minister Nirmala Sitharaman asked heads of PSBs to ensure fair and transparent recognition of bad loans and pursue robust risk management practices
Finance Minister Nirmala Sitharaman on Thursday asked heads of public sector banks (PSBs) to ensure fair and transparent recognition of bad loans and pursue robust risk management practices so as to maintain the momentum of growth and profitability.
PSBs earned a record aggregate net profit of around Rs 1.05 lakh crore in FY2022-23, almost triple from net profits earned in 2013-14.
In the review meeting with the top management of PSBs, discussions were held on the positive macro trends, improved business sentiments, Twin balance sheet advantage' and performance of the state-run banks.
All the major financial parameters viz., credit deployment, profitability, asset quality, capital adequacy etc. indicate that the performance of PSBs has significantly improved. They're adequately capitalised, resilient, and have sound financial health.
It was noted that the asset quality of PSBs has improved significantly with gross NPAs at 4.97 per cent and net NPAs at 1.24 per cent in March 2023, the finance ministry said in a statement.
Strengthened by high capital adequacy of 15.53 per cent CRAR (comparable to major economies of the world), clean balance sheets supported by a healthy provision coverage (90.68 per cent), and improved resilience, PSBs are well positioned to support the credit needs of the productive sectors of the growing economy.
Sitharaman emphasised banks' adherence to the regulatory framework by focusing on risk management, and diversification of business base.
The business outlook is progressively improving in spite of the headwinds from recent global banking sector developments, she said.
She also urged the banks to ensure an increase in rural, agricultural and sectoral credit to meet the Priority Sector Lending (PSL) norms and further ensure that the PSL targets are achieved across all sub-categories.
The finance minister directed bankers to meet the targets for the credit to street vendors under PM Street Vendor's AtmaNirbhar Nidhi (PM SVANidhi) and the momentum of disbursals gained under the scheme should be sustained.
During the meeting Housing and Urban Affairs Secretary Manoj Joshi said efforts are being taken to improve the adoption of digital payment tools and around 33 lakh beneficiaries are digitally active.
She asked the banks to lead a special campaign to ensure the onboarding of the PMSVANidhi beneficiaries on digital payment systems.
On improving lending under PMSVANidhi, it was decided that Minister of State for Finance Bhagwat Karad will ensure a special drive for expanding the coverage of PMSVANidhi, with the assistance of the Urban Local Bodies (ULBs).
Karad will visit different regions of the country in six phases before September 1, 2023, for the special credit outreach drive on PMSVANidhi.
She advised them to ensure that there is a fair and transparent recognition of non-performing assets (NPAs) as per the extant guidelines of the regulator and banks should periodically review it internally to ensure that there is proper recognition and reporting of the stressed assets.
Besides, she also asked banks to address associated business model risk with robust risk management practices and have efficient and optimum Asset Liability Management and take steps to improve the deposits and adopt a focussed approach on ease of services and customer protection.
With regard to Regional Rural Banks (RRBs), she said the sponsor banks of these entities should ensure a time-bound technological upgradation and continuously monitor their functioning to make them more efficient and effective, which will immensely benefit the people living in rural areas.
She will also chair meetings in the month of July-August 2023, in different regions of the country to review the functioning of the RRBs along with their sponsor banks, with a special focus on the status of technological upgradation of the RRBs.
The review of the RRBs would commence on July 21 at Tripura, in which the Finance Minister will conduct a review of the functioning of the RRBs in the Northeast, it said.
Meetings to review the functioning of the RRBs, along with the corresponding sponsor bank, will then be held by the Finance Minister region-wise in the North, West, South, East, and Central parts of the country, it said.
Bankers during the meeting assured the Finance Minister that with strong financial health, they are comfortably placed to withstand any macroeconomic shock.
The meeting was attended by Finance Secretary and Secretary Expenditure T V Somanathan; Financial Services Secretary Vivek Joshi DIPAM Secretary Tuhin Kanta Pandey, Public Enterprises Secretary Ali Raza Rizvi, Corporate Affairs Manoj Govil Revenue Secretary Sanjay Malhotra among others.
[Press Trust of India]
