Nirmala Sitharaman directs PSBs to monitor large accounts, streamline loan disbursals

Finance Minister Nirmala Sitharman on Saturday, December 30, held a meeting with heads of public sector banks (PSBs) and reviewed their financial performance. During the meeting, concerns related to cyber security and the risks on the financial sector were discussed.

Sitharaman directed PSBs to enhance due diligence before loan disbursement to ensure responsible lending practices across the board. The finance minister also asked PSBs to ensure regular monitoring of large loan accounts, and undertake swift and thorough legal action in cases of such default.

PSBs were also directed to adopt proactive cybersecurity measures and implement stringent security protocols to ensure integrity of domestic financial systems remains uncompromised.

Also Read: Nifty PSU Bank index jumps 28% in 2023. Can PSBs sustain the rally in 2024?

On the performance front, PSU banks have earned a net profit of about ₹68,500 crore during the first six months of the current financial year. During 2022-23, it said banks' balance sheets grew at a healthy pace, with both deposits and credit growth accelerating.

The gross non-performing assets (GNPA) ratio of scheduled commercial banks (SCBs) fell to a decade low of 3.9 per cent at the end of March 2023 and further to 3.2 per cent in September. The improvement in asset quality of banks that began in 2018-19 continued during 2022-23. The GNPA ratio stood at 3.2 per cent in the April-September period of the current fiscal.

The issues related to fraud and defaulters and progress on the National Asset Reconstruction Company Ltd (NARCL) also came up for discussion. Sitharaman directed that the acquisition of stressed accounts by NARCL needs to improve further, and necessary efforts must be made in this direction. It was also advised that NARCL and banks should hold regular meetings to expedite the on-boarding of stressed accounts.

NARCL, a government entity, was incorporated in 2021 with a majority stake held by PSBs and the balance by private banks. Canara Bank was the sponsor bank. It is registered with the Reserve Bank of India as an asset reconstruction company under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Earlier this month, the finance ministry held a review meeting with heads of PSBs and asked them to monitor all cases, especially the top 20 Insolvency and Bankruptcy Code cases as part of the management of their bad assets. During a meeting with managing directors and CEOs of PSBs, Financial Services Secretary Vivek Joshi asked them to review the top 20 cases monthly for their resolution.