NARCL and PSBs should expedite on-boarding of stressed accounts; Coordination between banks, security agencies, regulatory bodies and technology experts will create a more resilient financial ecosystem: Nirmala Sitharaman
FinTech BizNews Service
Mumbai, November 31, 2023: Union Minister for Finance and Corporate Affairs Smt.
Nirmala Sitharaman chaired a meeting to review the performance of Public Sector
Banks (PSBs) on various parameters, in New Delhi, on Saturday. The meeting was
also attended by Union Minister of State for Finance Dr Bhagwat Karad; Dr Vivek
Joshi, Secretary, Department of Financial Services; heads of public sector banks
besides senior officials of the department of financial services.
Acquisition Of Stressed Accounts
The progress on the acquisition of accounts by the National Asset Reconstruction
Company Ltd (NARCL) was also deliberated. The Finance Minister directed that the
acquisition of stressed accounts by NARCL needs to improve further, and necessary
efforts must be made in this direction. It was advised that NARCL and banks should
hold regular meetings to expedite the on-boarding of stressed accounts.
Attractive Deposit Schemes
In addition to the above measures, Smt. Sitharaman emphasised the importance of
mobilising deposits, urging PSBs to innovate and offer attractive deposit schemes to
enhance their deposit base, which will also enable them to extend more credit.
Frauds: Critical Threat To FIs
During deliberations on the fraud related matters, the Union Finance Minister, while
expressing satisfaction at the improved performance of the Public Sector Banks,
stated that bank frauds pose a critical threat to the security of both individual
customers and the financial institutions themselves, which can lead to financial
losses and reduced public trust in the banking system.
Advanced Fraud Detection Mechanisms
Smt. Sitharaman asked PSBs to concentrate on fraud prevention activities
concerned with both large corporate frauds and wilful defaults, as well as on actions
that defraud individual customers. The Union Finance Minister instructed the banks
to adopt advanced fraud prevention and detection mechanisms and ensure that the
customers are further educated about safe banking practices.
More Effort Into Recovery
The Union Finance Minister directed Banks to undertake consumer education
measures for protection from malicious fraud calls and to make efforts for timely
identification of accounts as fraud and their subsequent investigation. Banks were
also advised to put more effort into recovery from accounts declared as fraud and
willful default. The Union Finance Minister also asked banks to monitor the early
warning signals to check potential frauds.
Review Performance Of Counsel
Recognising that the effectiveness of legal action against defaulters before courts
and tribunals largely depends on effective representation by lawyers and attorneys
assisted by bank officials, the Union Finance Minister called for a performance
review of counsel representing PSBs to ensure better legal outcomes.
Responsible Lending
Smt. Sitharaman stated that the willful defaults not only strain the banks’ financial
health but also hamper the flow of credit in the economy and urged the PSBs to
adopt responsible lending practices across the board. The Union Finance Minister
instructed the PSBs to enhance due diligence before loan disbursement, ensure
regular monitoring of large loan accounts, and undertake swift and thorough legal
action in cases of such default.
Act Against Conniving Officials
Smt. Sitharaman also exhorted the banks to take strict administrative action against
the conniving officials of the banks, who enable fraud and wilful defaults.
Cyber Security Risks
Other issues related to cyber security were also deliberated in the meeting. The
preparedness of all the PSBs in addressing cyber security risks was reviewed by the
Union Finance Minister and PSBs were directed to ensure privacy of customer data.
Smt. Sitharaman stated that issues of cyber security should be seen from a system
perspective as a small vulnerability can be used by nefarious elements to create
system-wide risks.
Adapt To Evolving Digital Landscape
Further, the Finance Minister noted the need to adopt proactive cybersecurity
measures and implement stringent security protocols to protect sensitive financial
information and systems from cyber-attacks and exhorted the banks to adapt to the
evolving digital landscape, ensuring that the integrity of domestic financial systems
remains uncompromised.
Collaboration And Mutual Learning
The Union Finance Minister also emphasised the importance of collaboration and
mutual learning among the PSBs and coordination between banks, security
agencies, regulatory bodies and technology experts to create a more resilient
financial ecosystem against potential cyber-security threats.
