In a recent meeting chaired by Union Finance Minister Nirmala Sitharaman, significant advancements and directives were discussed regarding the onboarding of stressed accounts by the National Asset Reconstruction Company Ltd (NARCL) and the emphasis on fraud prevention and cybersecurity in the banking sector.
Key Highlights of the Meeting:
- Performance Review of Public Sector Banks (PSBs): Sitharaman reviewed the performance of PSBs on various parameters. Notably, the banks demonstrated improved performance with a net profit of about Rs 68,500 crore in the first half of the current financial year. The gross non-performing assets (GNPA) ratio of scheduled commercial banks (SCBs) also saw a significant decrease, reaching a decade-low of 3.9% at the end of March 2023 and further reducing to 3.2% in September.
- Expedited Onboarding of Stressed Accounts: The finance minister emphasized the need for further improvement in the acquisition of stressed accounts by NARCL. Regular meetings between NARCL and banks were advised to expedite the onboarding process of these accounts.
- Focus on Fraud Prevention and Detection: Sitharaman directed banks to concentrate their efforts on preventing large corporate frauds and willful defaults, as well as frauds that impact individual customers. Advanced fraud prevention and detection mechanisms are to be adopted, and customer education on safe banking practices is to be prioritized.
- Emphasis on Responsible Lending Practices: The minister urged banks to adopt responsible lending practices, enhance due diligence before loan disbursement, and monitor large loan accounts regularly. Swift and thorough legal action in cases of default was also emphasized, along with strict administrative action against bank officials involved in enabling fraud and willful defaults.
- Cybersecurity Measures: The preparedness of PSBs in addressing cybersecurity risks was reviewed. Banks were directed to ensure the complete privacy of customer data and adopt stringent security protocols to protect sensitive financial information from cyberattacks. Collaboration among PSBs, security agencies, regulatory bodies, and technology experts was highlighted as crucial for creating a resilient financial ecosystem against potential cybersecurity threats.
- Legal Representation and Recovery Efforts: Sitharaman called for a performance review of counsel representing public sector banks to ensure better legal outcomes. Additionally, banks were advised to put more effort into the recovery from accounts declared as fraud and willful default and to monitor early warning signals for potential frauds.
These initiatives are part of a comprehensive approach to enhance the performance and security of India’s banking sector, addressing critical issues such as stressed asset recovery, fraud prevention, and cybersecurity, thereby strengthening the financial health and trust in the banking system.