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Bankers to FM: PSBs adequately capitalised, prepared for potential stress

Union Finance Minister Nirmala Sitharaman met with the CMDs of public sector banks through virtual mode in New Delhi on Friday. Union Minister of State for Finance, Dr Bhagwat Kisanrao Karad, and Secretary, Department of Financial Services (DFS), Debasish Panda, as well as senior DFS officials, also attended the review meeting. 

Sitharaman evaluated the various steps taken by PSBs in implementing pandemic-related measures initiated by the government of India and the RBI, as well as their preparedness to deal with potential future disruptions that may occur due to the new variant of Covid-19. 

According to the FM, our collective efforts must strive to support sectors that are facing interruption as a result of the continued onslaught of the pandemic. She also urged bankers to continue supporting the agricultural, farming, retail, and MSMEs sectors.  

Despite headwinds from global development and Omicron spread, the business outlook is gradually improving. Contact-intensive sectors may require further assistance in combating the epidemic. Credit demand is expected to increase due to growth in retail segments, improved overall macroeconomic prospects, and improved borrowers’ financial health, according to the FM.

Bankers pointed out that PSBs have observed an improvement in the repayment culture in the country. PSBs have performed well and, supported by various policy measures, have supplied the necessary push to the economy in order for it to break free from the shackles of pandemic-induced stress. In their assessment of the overall situation, bankers felt confident that PSBs are adequately capitalised and prepared for any stress scenarios in the future. 

Performance of PSBs 

PSBs earned a net profit of Rs 318.2 billion in FY 2020–21, the highest in the previous five fiscal years, and a net profit of Rs 311.45 billion in the first half of FY2021-22, which was nearly equal to that of FY 2020–21. PSBs have reported recovery of Rs 5.49 trillion during the last seven financial years. 

PSBs are adequately capitalised and the CRAR of PSBs as of September 2021 is 14.4%, against the regulatory requirement of 11.5% (including CCB). The CET1 of PSBs was at 10.79% as of September 2021, against the regulatory requirement of 8%. As of September 2021, PSBs recorded y/y credit growth of 11.3% in personal loans, 8.3% in agriculture loans, and overall credit growth of 3.5%.

Under credit outreach programme launched in October 2021, PSBs have sanctioned an aggregate loan amount of Rs 612.68 billion.  

Karad said that PSBs are the power engines of our economy and congratulated the bankers for their performance during the pandemic times. Moving with the times, banking has become more open and customer-centric. 

SBI Chairperson gave an in-depth presentation on the pre-pandemic and current scenario of banking business to the finance minister. Later, CMDs/MDs of various PSBs also shared their views on the overall assessment of the banking business and gave various suggestions for the overall growth of the business.

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