FM Nirmala Sitharaman asks banks to ensure transparent recognition of NPAs

Union Finance Minister Nirmala Sitharaman on Thursday asked public sector banks to ensure a fair and transparent recognition of their non-performing assets (NPAs), even though the government-run lenders showed a significant improvement in their asset quality.

The finance minister made this observation during a meeting with the heads of public sector banks in New Delhi to review their performance.

During the meeting Sitharaman advised PSBs to “ensure that there is a fair and transparent recognition of NPAs as per the extant guidelines of the regulator and banks should periodically review it internally to ensure that there is proper recognition and reporting of the stressed assets,” as per a statement released by the finance ministry.

Sitharaman’s advice to PSBs comes amid release of data showing a significant improvement in asset quality. As per the latest data, the gross NPAs of public sector banks declined to 4.97 per cent in March 2023, while the net NPAs fell to 1.24 per cent.

Read | Cooperative banks will soon be able to write-offs NPAs: Shaktikanta Das

During the meeting, bankers underlined the significant improvement in major financial parameters like credit deployment, profitability, asset quality and capital adequacy.

The government-run banks earned a record aggregate net profit of around Rs 1.05 lakh crore in the financial year ended March 2023, almost triple from net profits earned in 2013-14.

Strengthened by high capital adequacy of 15.53 per cent CRAR (comparable to major economies of the world), clean balance sheets supported by a healthy provision coverage (90.68 per cent), and improved resilience, PSBs are well positioned to support the credit needs of the productive sectors of the growing economy, the union finance ministry noted in the statement.

“In their assessment of the overall situation, bankers were of the view that with strong financial health, they are comfortably placed to withstand any macroeconomic shock,” it said.

Meanwhile, Sitharaman announced that she will also chair meetings in the month of July-August 2023,in different regions of the country to review the functioning of the Regional Rural Banks (RRBs) along with their sponsor banks, with a special focus on the status of technological upgradation of the RRBs.

The review of the RRBs would commence from July 21, 2023 at Tripura, in which the union finance minister will conduct a review of the functioning of the RRBs in the North East.

Meetings to review the functioning of the RRBs, along with the corresponding sponsor bank, will then be held by the finance minister region-wise in the north, west, south, east, and central parts of the country.