A day after the government set a 15-day deadline for public sector banks (PSBs) to examine all non-performing assets above Rs 50 crore for possible fraud and to identify operational and technical gaps, industry chamber Ficci on Wednesday said the move would help in ensuring the much-required cleansing of the banking system.

The chamber also added that it would establish a transparent and effective risk management mechanism in the functioning of the state-run banks.

“This whole effort, especially linking of frauds to the wilful defaults, though, is an exercise that needs to be carried out cautiously and the government must ensure that investigations don’t cripple lending and dampen business sentiment further,” said FICCI President Rashesh Shah.

“With continuous efforts from the government and RBI, PSBs should strengthen their risk management practices with an immediate sense of urgency. Simultaneously, with the action on the existing NPA accounts, an effective time-bound action plan for infusing transparency and a robust risk management system in these banks is a necessity,” he added.