State-owned banks asked to build buffers

The finance ministry has asked public sector banks (PSBs) to build additional provisioning buffers against emerging stress in retail, MSME (micro, small and medium enterprises) and agriculture loans, as rising early-warning accounts and uncertainty from the West Asia war could trigger higher provisioning burdens under the proposed expected credit loss (ECL) regime, according to three people familiar with the matter.

- Harsh Kumar

The directive was conveyed by the department of financial services (DFS) to chiefs of 12 PSBs in a review meeting last week, the people cited above said on condition of anonymity, as the ministry sought to strengthen monitoring and recovery efforts at PSBs to prevent these accounts from slipping into non-performing assets (NPAs).