Global financial crisis: FM reviews health of PSBs

NEW DELHI: Finance minister Nirmala Sitharaman on Saturday reviewed the performance of public sector banks (PSBs) in the wake of the recent collapse of three major banks in the US and Europe – Silicon Valley Bank, Signature Bank, and Credit Suisse.

She took stock of the banks on various financial parameters including capital adequacy, asset quality, credit growth, and expansion plans. “During the meeting, Sitharaman advised PSBs to focus on preparedness with due diligence through adherence to the regulatory framework by focusing on risk management, diversification of deposits, and asset base. Looking at business models closely to identify stress points including concentration risks and adverse exposures,” the ministry tweeted.

Meanwhile, the minister also asked the banks to use the opportunity to frame detailed crisis management and communication strategies to remain vigilant about the interest rate risks and regularly undertake stress tests. In addition, she also asked PSBs heads to leverage the full potential of branches opened in international financial services centres in GIFT City, Gujarat.

The PSB heads apprised the minister that 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. Further, they said that the banks are vigilant of 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. Sitharaman also asked the banks to take focused steps to attract deposits given steps taken by the government to reduce tax arbitrage in some debt instruments.