Sitharaman reviews PSBs' preparedness after Silicon Valley bank collapse

Finance Minister Nirmala Sitharaman chaired a meeting on Saturday to review the preparedness of public sector banks after the collapse of Silicon Valley Bank and Credit Suisse triggered a crisis in the US and Europe.

The PSBs were reviewed on various financial health parameters and the resilience of PSBs in the current volatile environment, according to the ministry. The meeting was attended by the Minister of State for Finance Bhagwat Kishanrao Karad, Secretary, Department of Financial Services, and top officials of PSBs.

During the PSB review meeting, Sitharaman stressed the importance of preparedness along with due diligence through adherence to the regulatory framework by focusing on risk management, diversification of deposits and assets base.

She said that PSBs must look at business models closely to identify stress points, including concentration risks and adverse exposures. Sitharaman said PSBs should use this opportunity to frame detailed crisis management and communication strategies.

The PSBs claimed that their institutions 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 PSBs informed that they are vigilant about developments in the global banking sector and are taking all possible steps to protect themselves from any potential financial shock. All major financial parameters indicate stable and resilient PSBs with robust financial health, according to the bankers.

Policymakers and experts claim that the Indian banking system is in a good shape and can handle the situation caused by inflation and monetary tightening.

Narendra Modi-led government implemented a 4 R strategy of recognising NPAs transparently, resolution and recovery, recapitalising PSBs and reforms in the financial ecosystem. Over the last eight years, major banking reforms have ensured credit discipline, responsible lending and improved governance, along with the adoption of technology, amalgamation of banks and the general confidence of bankers.

All PSBs have an aggregate profit of Rs 66,543 crore in 2021 -- 22, and they have increased that to Rs 70,167 crore in the first nine months of the current financial year.

In December 2022, the provision coverage ratio of PSBs went from 46 per cent to 89.9 per cent. The capital adequacy ratio of PSBs went from 11.5 per cent in March 2015 to 14.5 per cent in December 2022.

The total market value of PSBs excluding IDBI Bank, which was categorised as a private sector bank in January 2019 increased from Rs 4.52 lakh crore in March 2018 to Rs 10.63 lakh crore in December 2022.