The Ministry of Finance reviews the performance of Public Sector Banks (PSBs) in light of the current global financial scenario, emanating from the failure of some international banks in the US and Europe.
The meeting was presided over by Union Finance Minister Smt. Nirmala Sitharaman and attended by Union Minister of State for Finance Dr Bhagwat Kishanrao Karad, Dr. Vivek Joshi, Secretary, Department of Financial Services, and MDs & CEOs of PSBs.
Focus on PSBs Preparedness
The meeting aimed to assess the resilience of PSBs in the face of the current financial crisis and review their preparedness on various financial health parameters. The Finance Minister emphasized the importance of adherence to the regulatory framework by focusing on risk management, diversification of deposits and assets base. The MD & CEOs of the PSBs apprised the Finance Minister that they follow best corporate governance practices, adhere to regulatory norms, ensure prudent liquidity management and continue to focus on having robust asset-liability and risk management.
Review of Global Scenario
During the review meeting, an open discussion was held with the MDs and CEOs of PSBs on the global scenario comprising of the failure of the Silicon Valley Bank (SVB) and the Signature Bank (SB) along with issues leading to the crisis in Credit Suisse. Smt. Sitharaman reviewed the exposure of PSBs to this developing and immediate external global financial stress from both the short and the long-term perspectives.
Stress Points
The Finance Minister underlined that PSBs must look at business models closely to identify stress points, including concentration risks and adverse exposures. Smt. Sitharaman also exhorted PSBs to use this opportunity to frame detailed crisis management and communication strategies.
Vigilance and Opportunities
Smt. Sitharaman was informed by the PSBs that they are vigilant of developments in the global banking sector and are taking all possible steps to safeguard themselves from any potential financial shock. All the major financial parameters indicate stable and resilient PSBs with robust financial health. After detailed deliberations, the Finance Minister advised PSBs to remain vigilant about interest rate risks and regularly undertake stress tests.
Smt. Sitharaman also highlighted that PSBs must leverage the full potential of branches opened in International Financial Services Centres in GIFT City Gujarat to identify international opportunities, including prospects related to Persons of Indian Origin (PIOs). The Finance Minister advised PSBs to take focused steps to attract deposits given the steps taken by the Government to reduce the tax arbitrage in some debt instruments. PSBs must pivot their strengthened financial position to support credit needs of the growing economy.
Focus on Credit Outreach
The Finance Minister also advised PSBs to focus on credit outreach in States where the credit offtake is lower than the national average, particularly in North-East and Eastern parts of the country. Further, PSBs should enhance business presence in new & emerging areas like One District One Product (ODOP), e-NAM, and drones. Additionally, PSBs should aim to increase brick & mortar banking presence in border and coastal areas. Finally, PSBs should promote the Mahila Samman Bachat Patra announced in the Budget 2023-24 through special drives and campaigns.
In conclusion, the review meeting highlighted the need for PSBs to be vigilant of the current global financial scenario and take steps to safeguard their financial health. The Ministry of Finance’s recommendations are expected to help PSBs remain resilient and prepared for potential future financial crises.