FM Sitharaman Asks State Run Banks to Access Risks, Cautions Bankers To Be Vigilant Amid SVB Failure

Last Updated: March 25, 2023, 19:46 IST

FM Nirmala Sitharaman (File photo)

Finance Minister Nirmala Sitharaman urged the banks to remain vigilant about the interest rate risks and regularly undertake stress tests.

Amid turbulence across the global banking system, Finance Minister Nirmala Sitharaman on Saturday reviewed the performance of public sector banks (PSBs)  and asked them to remain vigilant about the interest rate risks and regularly undertake stress tests.

Sitharaman focused on reviewing their resilience in the wake of the current global financial scenario emanating from the failure of some international banks, including the Silicon Valley Bank (SVB) and Signature Bank (SB).

In the meeting — that lasted nearly two hours — Sitharaman discussed the probable and current global financial stress from both short and long-term perspectives, news agency PTI said.

What did FM tell the banks?

She further said that banks should undertake due diligence and adhere to the regulatory framework by focusing on risk management and diversification of deposits and assets base.

For this, Sitharaman added, the PSBs must look at business models closely to identify stress points, including concentration risks and adverse exposures.

READ | The Silicon Valley Bank Crisis Explained in 7 Simple Points

Sitharaman also stressed 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).

She further asked them to take steps to attack deposits and pivot their strengthened financial position to support the credit needs of the growing economy.

The minister asked banks to focus on credit outreach in states where the credit offtake is lower than the national average, particularly in the northeast and eastern parts of the country.

She said PSBs should promote the Mahila Samman Bachat Patra, announced in the Budget, through special drives and campaigns and also focus on increasing brick-and-mortar banking presence in border and coastal areas.

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The meeting was also attended by Minister of State for Finance Bhagwat Karad, Financial Services Secretary Vivek Joshi and other senior officials, an official statement said.

What did the banks say?

The chiefs of PSBs told Sitharaman that they follow the 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 also highlighted that they are vigilant of developments in the global banking sector and are doing the needful to protect themselves from similar scenarios.

With PTI inputs 

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