Finance Minister Nirmala Sitharaman on Saturday chaired a meeting to review the preparedness of public sector banks on the back of the stress in the banking systems in the US and Europe after the recent collapse of Silicon Valley Bank and Credit Suisse triggered contagion fears.
The ministry said the PSBs were reviewed on various financial health parameters and the resilience of PSBs in the current volatile environment. The meeting was also attended by Minister of State for Finance Bhagwat Kishanrao Karad, Vivek Joshi, Secretary, Department of Financial Services, and top officials of PSBs.
During the PSB review meeting, Sitharaman stressed on preparedness along with due diligence through adherence to the regulatory framework by focusing on risk management, diversification of deposits and assets base.
She highlighted that PSBs must look at business models closely to identify stress points, including concentration risks and adverse exposures. Sitharaman added PSBs to use this opportunity to frame detailed crisis management and communication strategies.
The PSBs, on their part, claimed that their institutions 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.
The PSBs informed 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, the bankers said.
Policymakers and experts have claimed that the Indian banking system is in a good shape and can handle the situation caused due to inflation and monetary tightening.
The Narendra Modi-led government implemented a comprehensive 4R strategy of Recognising NPAs transparently, Resolution and recovery, Recapitalising PSBs, and Reforms in the financial ecosystem. Major banking reforms over the last eight years ensured credit discipline, responsible lending and improved governance, besides the adoption of technology, amalgamation of banks, and maintaining the general confidence of bankers.
All PSBs are in profit with an aggregate profit of Rs 66,543 crore in 2021-22, and that further increased to Rs 70,167 crore in the first nine months of the current financial year.
At the same time, resilience has increased with the provision coverage ratio of PSBs rising from 46 per cent to 89.9 per cent in December 2022. The capital adequacy ratio of PSBs improved significantly from 11.5 per cent in March 2015 to 14.5 per cent in December 2022.
The total market capitalisation of PSBs (excluding IDBI Bank, which was categorised as a private sector bank in January 2019) increased from Rs 4.52 lakh crore in March 2018 to Rs 10.63 lakh crore in December 2022.
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