Be alert, take stress tests, FM Nirmala Sitharaman tells PSBs amid US bank crisis

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NEW DELHI: The PSU bank chiefs informed finance minister Nirmala Sitharaman that they are vigilant of the developments in the global banking sector and are taking all possible steps to safeguard themselves from any potential financial shock. All major financial parameters indicate stable and resilient PSBs with robust financial health, the top officials told the FM. Global markets have been rattled by a string of bank failures in the US and Europe.
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.
“During the review meeting, an open discussion was held with the MDs and CEOs of PSBs on the global scenario consisting of the failure of the Silicon Valley Bank and the Signature Bank along with issues leading to the crisis in Credit Suisse,” the finance ministry said in a statement. Sitharaman reviewed the exposure of PSBs to this developing and immediate external global financial stress from both the short and the long-term perspectives.
As per the statement, she underlined that PSBs must look at their business models closely to identify ‘stress points’, including concentration risks and adverse exposures. She also exhorted PSBs to use this opportunity to frame detailed crisis management and communication strategies.
Sitharaman also said 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 PIOs.
During the discussion on India’s general banking scenario, the FM advised the PSBs take steps to attract the deposits given the steps taken by the government to reduce the tax arbitrage in some debt instruments. She also asked them to pivot their strengthened financial position to support credit needs of the growing economy and focus on credit outreach in states where the credit offtake is lower than the national average, particularly in northeast and eastern parts of India.
She also urged the bank chiefs to enhance business presence in new and emerging areas like One District One Product (ODOP), e-NAM, and drones and aim to increase brick and mortar banking presence in border and coastal areas.

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