Economy News

Finances: Minister of Finance convenes meeting of public lenders in context of global banking crisis – Mintpaisa

Finance Minister Nirmala Sitharaman called a special meeting of public lenders later this week to hear their views on heightened global concerns about the vulnerability of the banking system due to monetary tightening.

The finance minister will also assess the performance of public sector banks (PSBs) at the end of FY23, in addition to their capital requirements, if any, a person familiar with the matter said.

Although experts have ruled out any possible ripple effect on domestic banks given their strong balance sheets, the government wants to know from lenders if policy intervention is needed. “A review will be undertaken probably on Saturday,” the person quoted above said. The government has already contacted financial sector regulators. Any local impact has been ruled out as key metrics for banks remain robust, the person said. The government wants to do a thorough assessment to take preventive measures if necessary, the person said.

The Ministry of Finance has already asked all public banks to establish a three-year strategic roadmap starting in FY24. The government is also expected to approve the next generation of reforms in public sector banks as part of of the Ease 6.0 program during the first week of April.

The collapse of two regional banks in the United States – Silicon Valley Bank and Signature Bank – and the forced merger of Credit Suisse Group AG with rival UBS Group AG has stoked panic over a domino effect on the global banking industry.

Conservative approach taken
Rapidly rising interest rates in the United States and Europe imposed large mark-to-market losses on banks holding long-term debt. Worried depositors withdrawing funds, as happened in the case of Silicon Valley Bank, could lead to more failures.

The US administration is pushing to save the First Republic Bank, which has lost nearly 40% of its deposits.

Reserve Bank of India Governor Shaktikanta Das said India’s banking system continues to be stable and resilient, but warned banks against excessive asset-liability mismatches.

“We have increased our engagement with senior management and bank boards. There is a greater focus on identifying the root cause of vulnerabilities, rather than addressing symptoms alone,” he said. he said in a speech last week.

Offsite monitoring of banks has also become more intense and frequent, he said.

Gross non-performing assets (NPA) of all regular commercial banks fell to 5.8% of gross advances at end-March 2022 from 11.2% at end-March 2018.

In a response to a question in parliament on Monday, the government stressed that all public sector banks were profitable. The total profit was Rs 66,543 crore in FY22 and increased to Rs 70,167 crore in the first nine months of the current financial year.

The capital adequacy ratio of public sector banks has improved significantly from 11.5% in March 2015 to 14.5% in December 2022. In addition, Indian lenders passed the stress tests of the central bank.


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