Banking News

FM Nirmala Sitharaman tells PSBs to flag stress points in business, stay alert


New Delhi: Finance minister Nirmala Sitharaman asked state-run banks to review their business models closely to identify stress points, urging them to remain vigilant amid a deepening banking crisis in the US and Europe. Sitharaman urged banks to watch their interest rate and concentration risks and adverse exposures, and regularly undertake stress tests.

Public sector banks (PSBs) should frame detailed crisis management and communication strategies, she told the heads of state-run banks at a meeting on Saturday, the finance ministry said in a statement.

Sitharaman said banks should take focused steps to attract deposits after the government took measures to reduce tax arbitrage in some debt instruments, alluding to changes in the tax regime for debt funds announced on Friday.

Banks’ deposit growth has lagged behind the rise in the demand for credit, creating some concerns over asset-liability mismatch.

The meeting reviewed PSBs’ preparedness in wake of the stress in banking systems in the US and Europe. ET on Thursday reported that the finance ministry had called a special meeting of state-run banks on Saturday to assess the situation.

“The finance minister emphasised preparedness, along with due diligence, through adherence to the regulatory framework by focusing on risk management, diversification of deposits and asset base,” the statement said.

The meeting reviewed the global scenario following the failure of the Silicon Valley Bank (SVB) and the Signature Bank (SB) along with issues leading to the crisis in Credit Suisse. The US has seen three bank failures, while Switzerland forced the troubled Credit Suisse Group AG to merge with rival UBS Group. Lenders Assure Minister
On Friday, Deutsche Bank shares slumped sharply as markets fretted about the health of global banking.

The PSBs assured the government that they are maintaining vigilance on developments in the global banking sector and are taking all possible steps to safeguard themselves from any potential financial shock.

All the major financial parameters indicate stable and resilient PSBs with robust financial health, the lenders told the minister, according to the statement.

The banks assured the finance minister they follow best corporate governance practices, adhere to regulatory norms, ensure prudent liquidity management, and continue to focus on having robust asset-liability and risk management, the statement said.

Sitharaman asked PSBs to leverage the full potential of branches opened in the International Financial Services Centre in GIFT City, Gujarat, to identify international opportunities, including prospects related to Persons of Indian Origin (PIOs), the statement said.

She said banks should pivot their strengthened financial position to support the credit needs of the growing economy, focusing particularly on states where credit offtake is lower than the national average. Sitharaman also suggested lenders enhance their business presence in new and emerging areas such as One District One Product (ODOP), e-NAM, and drones, and aim to increase the brick and mortar banking presence in border and coastal areas.


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