Amid turbulence across the global banking sector, Finance Minister Nirmala Sitharaman has asked state-run banks to remain vigilant about the interest rate risks and regularly undertake stress tests.

In a meeting with chiefs of public sector banks (PSBs) in New Delhi on Saturday, lenders were asked to identify stress points, including “concentration risks and adverse exposures”.

Sitharaman also exhorted PSBs to use this opportunity to frame detailed crisis management and communication strategies.

She emphasised that the banks should undertake due diligence and adhere to the regulatory framework by focusing on risk management and diversification of deposits and assets base.

Sitharaman was chairing the meeting which was called to review the performance of PSBs on various financial health parameters and their resilience due to the current global financial scenario amid failure of some international banks in the US and Europe.

The meeting was also attended by Minister of State for Finance Bhagwat Karad, Financial Services Secretary Vivek Joshi and other senior officials, an official statement said.

Banks should safeguard themselves from any potential financial shock, the finance minister told bankers according to the statement.

The heads of PSBs apprised Sitharaman that ‘they follow the best corporate governance practices, adhere to regulatory norms, ensure prudent liquidity management and continue to focus on having robust asset-liability and risk management.’

They also said that they are vigilant of developments in the global banking sector and are taking all possible steps to safeguard themselves from any potential financial shock.  

“All the major financial parameters indicate stable and resilient PSBs,” the statement added.

The minister also stressed that PSBs must leverage the full potential of branches opened in International Financial Services Centres in GIFT City Gujarat to identify international opportunities, including prospects related to Persons of Indian Origin (PIOs).

She asked banks to take focused measures to attract deposits, given the steps taken by the government to reduce the tax arbitrage in some debt instruments and pivot their strengthened financial position to support the credit needs of the growing economy.

The minister asked banks to focus on credit outreach in states where the credit offtake is lower than the national average, particularly in the northeast and eastern parts of the country, and enhance business presence in new and emerging areas like One District One Product (ODOP), e-NAM and drones.

She said PSBs should promote the Mahila Samman Bachat Patra, announced in the Budget, through special drives and campaigns and also focus on increasing brick-and-mortar banking presence in border and coastal areas.