New Delhi: Facing mammoth NPAs, PSU banks Wednesday said the problem of poor asset quality "may continue" for another 2-3 quarters as the Finance Ministry took stock of issues, including the alleged Rs 6,100-crore black money remittance case involving Bank of Baroda, facing them.
"The issue of poor asset quality was discussed. The banks clarified that the problem may continue for two to three quarters before their situation improves. Banks were advised to make judicious use of their capital," a Ministry statement said.
Briefing reporters after the meeting heads of all public sector banks along with top ministry officials, Minister of State for Finance Jayant Sinha told reporters that government has "taken various steps to bring down" non-performing assets (NPAs) and those measures too were discussed.
Gross NPAs of state-run banks at the end of March quarter stood at 5.2 percent of total advances compared with 5.63 percent in December.
Sinha said the recent developments relating to Bank of Baroda were also discussed and "banks were exhorted to have system in place to prevent such incidents".
Besides CBI and ED, SFIO is also probing into the alleged Rs 6,100-crore black money transaction case involving a Delhi branch of Bank of Baroda.
The meeting also deliberated on the issue of having robust compliance policies and the need to have requisite checks in place to detect any violation, along with strong alarm and signalling systems.
"The issue of human intervention in compliance related issues was also discussed and it was deliberated as to how to make it completely system driven," the statement added.
It further said banks were asked to give the progress on different subjects post Indradhanush framework.
In August, the government had announced 'Indradhanush' package for transforming PSBs through a bottoms-up approach. It represents the most comprehensive reform effort undertaken since banking nationalisation in 1970.
The statement further said various issues related to board and governance were discussed in detail.
The issues included the board structure and issues relating to appointment of directors, functioning of board level committees and other measures to improve the decision making process of the board. Risk management practices were also discussed.
The issue of non-core assets and whether disposing them off is in commercial interest of the banks to improve capital adequacy was also discussed.
The discussions also covered existing foreign branches of PSBs. How can best value be realised from such investments and possible role of the Government was also taken up.
The Indradhanush framework mainly comprised of appointments, Banks Board Bureau (BBB), capitalisation plan, destressing, empowerment, framework of accountability and governance reforms among others.
