PSBs asked to focus on robust risk management practices
New Delhi: The government has asked public sector banks to focus on robust risk management practices and mitigate cyber security risk as part of the three-year strategic roadmap designed for them to further strengthen the sector and prevent build up of bad debts. A review of banks by the finance ministry is expected later this month that will evaluate reform goals of each bank individually and prepare a medium-term strategy to maintain the positive momentum in the banking sector, two persons aware of the development said.
As part of the strategy, banks will further use technology to process automation across every domain including back-office operations. Banks will also strengthen their underwriting processes and increase coverage of early warning systems (EWS) to identify and reach out to high-risk borrowers preventing any build-up of bad debts that have been successfully arrested by several banks over past few years.
“We will individually discuss with each bank on the steps taken by them to strengthen their underwriting systems and make banking operations smooth and efficient with a robust risk reporting structure. A strategy will be prepared thereafter on the basis of the strengths and capabilities of each bank with focus on keeping a check on bad loans without obstructing credit flows," said one of the two persons quoted above.
Query sent to the finance ministry and financial services secretary remained unanswered till the press time. The move comes in the backdrop of public sector banks reporting vastly improved performance over the last few quarters with the overall net profit of 12 PSU banks in the Q1 of FY24 surging to ₹34,418 crore as compared to a net profit of ₹15,307 crore recorded in the Q1 of FY23.
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