Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman chaired the meeting to review the performance of Public Sector Banks (PSBs) on various financial health parameters for the financial year 2022-23 on 6th July 2023. It was opined that all the major financial parameters showed that the PSBs had a significant improvement.
During the review meeting, the heads of Public Sector Banks (PSBs) engaged in discussions regarding the positive macroeconomic trends, enhanced business sentiments, the advantage of the ‘Twin balance sheet,’ and the performance of PSBs.
The performance of Public Sector Banks (PSBs) has shown significant improvement across key financial indicators such as credit deployment, profitability, asset quality, and capital adequacy. PSBs are now well-capitalized, resilient, and possess a strong financial foundation.
It was also 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.
In the fiscal year 2022-23, the Public Sector Banks (PSBs) achieved a significant milestone by generating an unprecedented combined net profit of approximately Rs. 1.05 lakh crore. This amount is nearly triple the net profits earned in the fiscal year 2013-14. PSBs have fortified their position with a robust capital adequacy ratio (CRAR) of 15.53%, which is comparable to major global economies.
They have also maintained clean balance sheets, supported by a healthy provision coverage ratio of 90.68%. With improved resilience and financial strength, PSBs are well-equipped to meet the credit requirements of the productive sectors in an expanding economy.
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.
Smt. Nirmala Sitharaman highlighted the importance of banks complying with the regulatory framework, with a specific focus on risk management and diversification of their business base.
The Finance Minister also acknowledged that while the overall Priority Sector Lending (PSL) has surpassed the mandated target, it is essential for banks to meet the PSL targets in sub-categories as well. This includes sectors such as agriculture, especially small and marginal farmers, as well as micro enterprises, among others.
Advises by Finance Minister to PSBs:
i. 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.
ii. Meet the targets for the credit to street vendors under PMSVANidhi and the momentum of disbursals gained under PMSVANidhi should be sustained.
iii. 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.
iv. 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.
v. Address associated business model risk with robust risk management practices and have efficient and optimum Asset Liability Management;
vi. Take steps to improve the deposits and adopt a focussed approach on ease of services and customer protection.
The meeting was also attended by Union Minister of State for Finance Dr Bhagwat KisanraoKarad; Finance Secretary and Secretary Expenditure Dr T.V. Somanathan; Secretary with other dignitaries.
The Finance Minister of India announced her plans to chair meetings across various regions of the country in July-August 2023.
These meetings will specifically focus on reviewing the operations of the Regional Rural Banks (RRBs) in collaboration with their sponsor banks. The primary emphasis will be placed on evaluating the technological advancements and upgrades implemented by the RRBs.
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