FM Sitharaman's meet with PSBs on July 6 to focus on performance review

Finance Minister Nirmala Sitharaman will hold a meeting of chiefs of public sector banks (PSBs) on July 6, which is likely to focus on the performance review of the lenders on financial inclusion as well as on various financial parameters, two people aware of the development said.

“The meeting is to take place on Thursday where banks’ performance in the previous financial year will be discussed and a road map on the way forward for the banks in FY24 will be provided,” a senior financial ministry official said.

The performance review of the PSBs includes the individual bank-wise details of the financial parameters, such as non-performing assets, capital adequacy ratio, net interest income, operating expenses, among others.

“The banks are in a strong position in terms of capital adequacy ratio and are expected to continue their contribution in the overall development of the economy. Performance of PSBs on the financial inclusion schemes is also likely to be reviewed,” he added.

A managing director and chief executive officer of a PSB said the bank was preparing for the upcoming meeting and was expecting the discussions to focus on the review of the financial snapshots of the bank.

“The ministry has raised concerns on the recent increase in the unsecured loan portfolio of the PSBs,” he said.

Sitharaman on Saturday at an event said the performance of PSBs had improved on account of various initiatives taken by the Modi government since 2014. “There was an improvement in all critical parameters like return on asset, net interest margin, and provisioning coverage ratio. “Public sector banks are doing well, their net profit almost tripled to Rs 1.04 trillion in FY23,” she had said.

The finance minister also asked banks to adhere to regulatory norms, focus on robust asset liability and risk management elements. She suggested PSBs to frequently run drills for digital safety and ensure adequate firewalls around their systems.

In the last review meeting held in March, there were discussions on the challenges for the PSBs on the parameters of net interest margin (NIM) decline, high inflation, and risk-based pricing of advances under which a low share of advances linked to the external benchmark based lending rates were highlighted.

The ministry in its last review meeting had directed PSBs to properly monitor and make provision for pledged shares of companies by integrating market data, as well as manage overall exposure to such companies that would enable them to take timely action.

The last meeting came in the light of a global financial crisis arising from the collapse of some international banks in the US and Europe.