Six working groups set up to suggest ways to improve functioning of PSBs to submit report by Dec

Six working groups created to suggest ways to improve digitisation in the state-owned banks and strengthen their balance sheets have been asked to submit their respective reports by December, according to a senior banker. Participating in the meeting, Financial Services Secretary Sanjay Malhotra recently asked the banks to explore strategies for long-term profitability and adopt a more customer-centric approach.

The senior banker, who participated in the recently concluded Manthan 2022 – a meeting of the top PSU bankers, said the six working groups would look into functioning the public sector banks (PSBs) and suggest ways to improve customer service, digitisation, HR incentives, corporate governance and collaboration. The working groups are expected to submit their respective reports by the end of the year, the banker said.

The groups will have regular meetings and periodic review to track the progress of each panel, another banker said. Manthan was held on April 22, to brainstorm with the top leadership of public sector banks and unlock next-generation reforms, while continuing with the EASE journey. The last such exercise was held in 2019. The first PSB Manthan took place in 2014.

Public sector banks have turned corner in 2020-21, after booking losses for five years due to various steps taken by the government. It is to be noted that no PSBs have faced any loss in the April-December period of 2021-22 and clocked a collective net profit of Rs 48,874 crore during this period.

They earned a combined net profit of Rs 31,820 crore in 2020-21. However, there were collective losses for five straight years during 2015-16 to 2019-20.

The highest amount of net loss was registered in 2017-18 at Rs 85,370 crore, followed by Rs 66,636 crore in 2018-19; Rs 25,941 crore in 2019-20; Rs 17,993 crore in 2015-16 and Rs 11,389 crore in 2016-17. During 2009-10 to 2014-15, the PSBs were earning profits on their books.

To improve the financial health of the PSBs, the government implemented a comprehensive 4R’s strategy — recognition of non-performing assets (NPAs) transparently, resolution and recovery of value from stressed accounts, recapitalisation of PSBs, and reforms in PSBs and the wider financial ecosystem — for a responsible and clean system. Comprehensive steps were taken under the 4R’s strategy to reduce NPAs of PSBs.

As part of the strategy, the government has infused Rs 3,10,997 crore to recapitalise banks during the last five financial years — from 2016-17 to 2020-21, out of which Rs 34,997 crore were sourced through budgetary allocation and Rs 2,76,000 crore through issuance of recapitalisation bonds to these banks.

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