Asserting that the fundamentals of many public sector banks (PSBs) have improved in recent months, Rajiv Kumar, Secretary, Department of Financial Services (DFS), on Thursday said he expects some of them to come out of the RBI’s Prompt Corrective Action (PCA) framework this fiscal.

As on date, as many as 11 out of 21 banks are under the central bank’s PCA framework. The PCA framework was issued by the RBI to encourage banks to eschew certain riskier activities, improve operational efficiency, and focus on conserving capital to strengthen the banks.

Kumar was speaking to reporters after inaugurating Canara Bank’s digital banking branch Candi in the Capital.

Earlier, during his address at the event, Kumar said that the worst is over for public sector banks, and their asset quality has “improved transparently” in recent months.

Digitisation of banks

“Close to 2.2 lakh shell companies have been closed. No more using such vehicles to hoodwink lenders. Several steps have been taken to clean up the balance sheets of banks in the last three-four years, and to ensure that they evolve into very strong, very clean and responsive customer-friendly banks,” he said, adding that digitisation of banks has helped meet this objective.

Kumar highlighted that aggregate losses of PSBs had come down to ₹16,600 crore in the June quarter of this fiscal from ₹62,680 crore in the March quarter. On the other hand, operating profit of PSBs had gone up to ₹36,600 crore in the June quarter from ₹34,000 crore in the March quarter.

“NPAs have been transparently recognised. Provisioning has been done transparently. Operating profits are on the rise. Recapitalisation has been done. Fundamentals of banks are improving,” he said.

Kumar also made it clear that the government would not hesitate to take stern action against those involved in any form of misconduct, including wilful loan defaults.

“We are ok with losses; we are not ok with any misconduct. We have ensured that all stakeholders in the system, including auditors and bank top management understand their responsibilities,” he said.

Kumar said that credit growth in the banking system was up 12.8 per cent in April-June this fiscal.

Also, provision coverage ratio of banks had reached a healthy level of 63.8 per cent, he said.

Kumar said that already the Insolvency and Bankruptcy Code (IBC) was changing the entire creditor-debtor relationship.

“Today, PSBs losses are because of recognising NPAs upfront, taking the bull by the horns. Now the cleaning up is complete, and the banks are now left with high-quality assets,” he said.

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