FM Nirmala Sitharaman to meet chiefs of PSU Banks today; here’s what’s on agenda

Finance minister Niramala Sitharaman on 25 March will meet managing directors of public sector banks (PSBs) in order to review performance against the backdrop of the failure of a few banks in the US and the liquidity crisis faced by Credit Suisse.

Sources told news agency PTI that the meeting is going to take stock of the progress made by banks in achieving targets set for the various government schemes including: Kisan Credit Card (KCC), Stand-Up India, Pradhan Mantri Mudra Yojana (PMMY), emergency credit line guarantee scheme (ECLGS) to help businesses affected by COVID-19.

This will be the first full review meeting after the presentation of Union Budget 2023-24 on 1 February. The banks would also be asked to focus on the areas highlighted by the Budget, including credit flow to productive sectors.

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Sources further added that the finance minister will review financial inclusion, credit growth, asset quality, and capital raising and business growth plan of banks for the next financial year. Discussion will also be held on non-performing assets (NPAs) of ₹100 crore and the recovery status.

This meeting comes against the backdrop of global concern over the failure of banks due to aggressive monetary tightening.

The US Fed on Wednesday hiked interest rates by 25 basis points to tame high inflation despite the banking crisis. To fight the persistent hot inflation, the Fed has so far increased rates from zero to 4.75 to 5 per cent, all in just one year.

Taking a cue, both, the Bank of England and the European Central Bank (ECB) have also raised their benchmark interest rates.

Meanwhile, policymakers and experts have said that the Indian banking system is in good shape and can handle the situation caused due to monetary tightening.

Various reforms undertaken by the government have resulted in significant improvement in the asset quality of public sector banks, with the gross NPA ratio declining from the peak of 14.6 per cent in March 2018 to 5.53 per cent in December 2022.

All PSBs are in profit with an aggregate profit of ₹66,543 crore in 2021-22, and that further increased to ₹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 ₹4.52 lakh crore in March 2018 to ₹10.63 lakh crore in December 2022, he said.

The government implemented a comprehensive 4R strategy of Recognising NPAs transparently, Resolution and recovery, Recapitalising PSBs, and Reforms in the financial ecosystem.

Major banking reforms undertaken by the government over the last eight years ensured credit discipline, responsible lending and improved governance, besides the adoption of technology, amalgamation of banks, and maintaining general confidence of bankers.

Yesterday, the Lok Sabha passed the Finance Bill, 2023 with some amendments. Union Finance Minister Nirmala Sitharaman tabled ‘The Finance Bill, 2023’ in the lower house amid sloganeering by Opposition MPs demanding a JPC inquiry into the Adani Group issue. She introduced 64 official amendments to the Finance Bill which was tabled in Parliament on February 1 along with the Budget proposals. 

(With inputs from PTI)