Monday, June 21

Public Sector Banks to be ranked on basis of performance

The government will start surveying public sector banks annually to rank them on performance parameters ranging from profitability to customer satisfaction. Last year, the government had initiated its reforms agenda for state run lenders termed EASE — Enhanced Access and Service Excellence — and directed them to draw up a board-approved strategic vision consistent with their risk-appetite framework.

“We will come out with the EASE survey in this fiscal, which will indicate how banks have performed. This will be done annually and will encourage competitiveness among lenders,” a senior finance ministry official said.

The parameters include customer responsiveness, financial inclusion, digital platforms and security. “Financial performance will be assessed on the basis of recoveries made, return on assets and differentiated banking strategy,” the finance ministry official said.

The government expects the financial performance of banks to improve as their bad loans come down. Last month, the RBI allowed three lenders to come out of the prompt corrective action framework, under which some of their activities were curbed.

Financial services secretary Rajiv Kumar had then told ET that both the government and banks are fully committed towards the reform process and other lenders are also working towards faster recovery.

The finance ministry had noted that the recognition exercise for public sector banks is almost over, with restructured standard assets declining from a peak of 7% in March 2015 to 0.59% as of September 2018. “PSBs have made a record in recoveries at Rs 60,726 crore in the first half of the current financial year, which is more than double the amount recovered over the corresponding period last year,” Kumar had said. The government will also infuse the last tranche of additional capital of Rs 41,000 in state-run lenders to strengthen their capital base. This would enhance the total recapitalisation in the current financial year to Rs 1.06 lakh crore from Rs 65,000 crore. The finance ministry has said that the gross non-performing assets of state-owned banks have started declining after peaking in March 2018, registering a drop of Rs 23,860 crore in the first half of the current financial year.

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