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FM exhorts PSBs: Frame detailed crisis management strategy

Public sector banks should remain vigilant about the interest rate risks and regularly undertake stress tests, said Union Minister for Finance Nirmala Sitharaman.

She chaired a meeting  on Saturday to review the performance of PSBs on various financial health parameters, and their resilience in light of the current global financial scenario emanating from the failure of some international banks in the USA and Europe.

Union Minister of State for Finance Dr Bhagwat Karad, Dr Vivek Joshi, Secretary, Department of Financial Services (DFS), and MDs and CEOs of PSBs were present at the meeting.

An open discussion was held with the MDs and CEOs of PSBs on the global scenario including the failure of the Silicon Valley Bank (SVB) and the Signature Bank (SB) along with issues leading to the crisis in Credit Suisse. Sitharaman reviewed the exposure of PSBs to this developing and immediate external global financial stress from both the short and the long-term perspectives. FM emphasized on preparedness along with due diligence through adherence to the regulatory framework by focusing on risk management, diversification of deposits and asset base. FM underlined that PSBs must look at business models closely to identify stress points, including concentration risks and adverse exposures. Sitharaman also exhorted PSBs to use this opportunity to frame detailed crisis management and communication strategies.

The MD and CEOs of the PSBs apprised the FM 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, they are vigilant of developments in the global banking sector and are taking all possible steps to safeguard themselves from any potential financial shock.

FM advised PSBs to remain vigilant about the interest rate risks and regularly undertake stress tests. Sitharaman also highlighted that PSBs must leverage the full potential of branches opened in International Financial Services Centres in GIFT City Gujarat to identify international opportunities, including prospects related to Persons of Indian Origin (PIOs). FM also advised PSBs to take focused steps to attract the deposits given the steps taken by the Government to reduce the tax arbitrage in some debt instruments; Pivot their strengthened financial position to support credit needs of the growing economy; Focus on credit outreach in states where the credit offtake is lower than the national average, particularly in North-East and Eastern parts of the country; Enhance business presence in new and emerging areas like One District One Product (ODOP), e-NAM, and drones; Aim to increase brick & mortar banking presence in border and coastal areas.

PR Newswire

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