Bankers told to address associated business model risk with robust management practices
Finance Minister Nirmala Sitharaman has advised private sector banks (PSBs) to ensure an increase in rural, agriculture and sectoral credit to meet the Priority Sector Lending (PSL) norms and further ensure that the PSL targets are achieved across all sub-categories.
She also called on the PSBs to meet the targets for the credit to street vendors under PMSVANidhi and the momentum of disbursals gained under PMSVANidhi. These should be sustained.
Ensure that there is a fair and transparent recognition of NPAs as per the extant guidelines of the regulator and banks should periodically review it internally to ensure that there is proper recognition & reporting of the stressed assets, the Minister said during a review of PSBs on 6 July 2023.
The sponsor banks of the Regional Rural Banks (RRBs) should ensure a time-bound technological upgradation of the RRBs and continuously monitor their functioning to make them more efficient and effective, which will immensely benefit the people living in rural areas, Sitharaman underlined.
She wants the banks to address associated business model risk with robust risk management practices and have efficient and optimum Asset Liability Management.
The Minister stressed that steps be taken to improve the deposits and adopt a focussed approach on ease of services and customer protection.
The Minister reviewed the performance of Public Sector Banks (PSBs) on various financial health parameters for the financial year 2022-23.
During the review meeting, The PSB heads discussed positive macro trends, improved business sentiments, ‘Twin balance sheet advantage’ and performance of PSBs.
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.
The meeting noted that the Asset quality of PSBs has improved significantly with gross NPAs at 4.97% and net NPAs at 1.24% in March 2023.
During FY 2022-23, the PSBs earned a record aggregate net profit of around Rs.1.05 lakh crore, almost triple from net profits earned in FY 2013-14.
In their assessment of the overall situation, bankers were of the view that with strong financial health, they are comfortably placed to withstand any macroeconomic shock.
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. Fiinews.com
