FM Arun Jaitley to meet PSB chief executives today, review performance

Finance minister Arun Jaitley will hold the annual review meeting with chief executives and the top management of public sector banks (PSBs) on Tuesday. This is the first meeting that the government is holding with public sector bankers, following its announcement to merge Bank of Baroda, Dena Bank and Vijaya Bank to create the country's third largest bank after State Bank of India and HDFC Bank. 

The day-long meeting is set to review the measures taken by PSBs to recover bad loans, financial performance in the present financial year, reform measures and financial inclusion. The Finance Minister is expected to deliver his opening remarks, which will be followed up by review of PSBs.

The bankers will hold discussions with Ministry of Electronics and Information Technology, Ministry of Rural Development, Ministry of Ministry of Micro, Small and Medium Enterprises (MSME) and Ministry of Housing and Urban Affairs officials. The bankers will particularly discuss steps to boost MSME and housing loans and discuss digitisation initiatives with these ministries.The Banks Board Bureau (BBB) will also hold an interaction with public sector bankers and discuss a leadership development programme in a bid to prepare future leaders in top positions in state-owned banks. The government's discussions with bankers will also revolve around the capital needs of PSBs in the coming quarters.

As a part of the Rs 2.11-trillion capital infusion programme announced last year, the government will infuse Rs 650 billion in this financial year. The government had infused around Rs 900 billion in PSBs last financial year. As per an analysis done by ICRA, the Tier-I capital ratio of 11 PSBs stood at 7.5 per cent, as against the minimum regulatory requirement of 7 per cent indicating the limited ability of PSBs to absorb further losses.
 

"ICRA estimates the PSBs to require capital of Rs 1.2-1.8 trillion during FY2019, if the banks were to meet regulatory capital ratios including capital conservation buffers (CCBs)," Anil Gupta, Vice President, Financial Sector Ratings, ICRA has said. In its submission to a Parliamentary panel recently, the Indian Banks' Association (IBA) said it wants the government to do a "realistic assessment" of capital required by public sector banks (PSBs) as the lenders have posted losses due to a surge in bad loans even after a Rs 2.1 trillion recapitalisation package was announced by the Centre last year.

So far, in the present financial year, the government has infused around Rs 136 billion in six PSBs, including Punjab National Bank, Andhra Bank and Allahabad Bank, mainly on account of maintaining their minimum capital requirement at the time of paying interest towards bond holders of Additional Tier 1 (AT-1) bonds.In the first quarter of this financial year, PSBs recovered non-performing assets (NPAs) worth Rs 365 billion - almost half of the amount recovered in previous financial year (Rs 745 billion).

The net losses of PSBs reduced 73 percent in the first quarter to Rs 166 billion compared to Rs 627 billion the previous quarter. The provision coverage ratio (PCR) of PSBs stood at 63.8 percent in the first quarter of this financial year, 6.3 percentage points higher than a PCR of 57.5 per cent in 2014-15, a year before the RBI initiated its asset quality review. The PCR refers to the proportion of bad assets that has been provided for.Earlier this year, the finance ministry had met 11 PSBs under the Reserve Bank of India's prompt corrective action (PCA) and sought an action plan to come out of the framework.