FM calls for better risk management from PSBs

Finance Minister Arun Jaitley on Thursday said the recent instances of unfair practices at public sector banks (PSBs) were disturbing, adding the government was working towards improving risk management and bringing more professionalism into the functioning of these banks.

"Hope these (the recent cases) are a drop in the ocean and we learn lessons from them," Jaitley said, at the foundation day celebrations of state-owned Indian Bank here. "Professionalising the management of the banks, we have taken some decisions in this regard. We expect banks to have better risk management. The Department of Financial Services has been actively working in this regard."

This was the finance minister's first formal statement on the issue since Syndicate Bank chairman S K Jain was arrested by the Central Bureau of Investigation (CBI) on allegations of receiving a bribe of Rs 50 lakh to enhance credit limits of Bhushan Steel and Prakash Industries.

The government has also initiated a forensic audit at Oriental Bank of Commerce and Dena Bank after some executives at these lenders came under the CBI's lens for alleged misappropriation of funds worth Rs 436 crore from fixed deposits.

"Conventionally, Indian banking has been professional and conservative. That's why we survived the sub-prime crisis. Hope the level of professionalism will continue and enhance. Credibility is most important for the banking sector. We must continuously endeavour to raise the standards," Jaitley said.

Questions were raised about the quality of bank boards and risk management after these cases came to the fore. Poor oversight, coupled with an economic slowdown, led to a huge rise in the bad loans of government banks. Non-performing assets of public sectors banks increased to 4.72 per cent of their total assets at the end of March 2014.

The finance minister also said the government accorded high importance to recapitalisation of PSBs.