FM Urges PSBs To Strengthen Risk Management And Transparent NPA Recognition Norms

The Finance Minister (FM) of India on Thursday has called upon Public Sector Banks (PSBs) to adhere to transparent non-performing asset (NPA) recognition norms and strengthen their risk management practices, PTI Reported.

Public Sector Banks (PSBs) achieved an unprecedented aggregate net profit of approximately Rs 1.05 lakh crore in the fiscal year 2022-23, exhibiting remarkable growth nearly three times higher than the net profits earned in 2013-14.

The performance of the state-run banks was discussed during the review meeting with the top management of PSBs, along with the good macrotrends, improved business sentiment, and "Twin Balance Sheet Advantage."

All of the key financial metrics, including capital sufficiency, asset quality, profitability, and loan deployment, show a considerable improvement in PSB performance. They have strong financial standing, are resilient, and have ample money.

According to a statement from the finance ministry, PSB asset quality has greatly improved, with gross NPAs at 4.97 percent and net NPAs at 1.24 percent in March 2023.

PSBs are well-positioned to meet the credit needs of the productive sectors of the expanding economy thanks to their strong capital adequacy of 15.53 percent CRAR (comparable to major economies around the world), clean balance sheets, which are supported by a healthy provision coverage of 90.68 percent, and improved resilience.

Sitharaman underlined the need of risk management and business base diversification in ensuring banks' compliance with the regulatory framework.

Despite the challenges caused by recent global banking sector developments, she indicated that the business picture is steadily improving.

In order to comply with the Priority Sector Lending (PSL) standards and further ensure that the PSL targets are met across all subcategories, she also asked the banks to enhance rural, agricultural, and sectoral lending.

The PM Street Vendor's AtmaNirbhar Nidhi (PM SVANidhi) has set targets for lenders to meet in order to provide credit to street vendors, and the momentum of disbursals obtained through the programme should be maintained, according to the finance minister.

Housing and Urban Affairs Secretary Manoj Joshi stated during the meeting that efforts are being made to increase the adoption of digital payment methods and that around 33 lakh beneficiaries are active online.

She requested that banks spearhead a specific drive to ensure that PMSVANidhi recipients be added to digital payment systems.

It was agreed that Minister of State for Finance Bhagwat Karad would oversee a particular campaign to increase PMSVANidhi's coverage with the help of Urban Local Bodies (ULBs) in order to improve lending under the programme.

Karad has planned a special credit outreach drive on PMSVANidhi, which will be conducted in six phases across various regions of the country before September 1, 2023.

She instructed them to make sure that non-performing assets (NPAs) are recognised fairly and transparently in accordance with the regulator's current requirements, and banks should routinely evaluate this internally to make sure that stressed assets are properly identified and reported.

She also urged banks to take steps to increase deposits, have a focused strategy on service accessibility and customer safety, handle associated business model risk with strong risk management procedures, and have an effective and optimal Asset Liability Management.

Regarding Regional Rural Banks (RRBs), she stated that the sponsor banks of these organisations should ensure a time-bound technological upgrade and continuously monitor their functioning to make them more efficient and effective, which will significantly benefit the people living in rural areas.

She will also serve as the moderator of meetings in various parts of the nation in the months of July and August 2023 to examine how the RRBs and their sponsor banks are operating, with a particular emphasis on the RRBs' technological advancement.

According to the statement, the Finance Minister will undertake an assessment of how the RRBs are operating in the Northeast on July 21 in Tripura as part of the RRB review process.

The Finance Minister will subsequently hold meetings in the North, West, South, East, and Central regions of the nation to examine how the RRBs and their associated sponsor banks are operating, it was stated.

The meeting's bankers gave the finance minister assurances that they are well-positioned to weather any macroeconomic shock because of their sound financial standing.

T V Somanathan, the secretary of finance and the secretary of expenditure, Vivek Joshi, the secretary of financial services, Tuhin Kanta Pandey, the secretary of public enterprises, Ali Raza Rizvi, the secretary of corporate affairs, Manoj Govil, and Sanjay Malhotra, among others, were present at the meeting.