PM harps on trust and transparency for depositors, investors in fin sector

Says banking sector was badly hit 12 years ago due to aggressive lending; but now instead of brushing NPAs under the carpet, it is mandatory to report even one-day defaults

Prime Minister Narendra Modi said on Friday his government's top priority is to make the financial sector transparent so that depositors and investors trust it.  

“The old ways and old systems of banking and non-banking sectors are changing,” Modi said addressing a webinar on effective implementation of Budget announcements for financial services.

The government has taken steps to free the country from non-transparent credit culture, Modi said. The banking sector was severely impacted 12 years ago due to aggressive lending practices. He said now instead of brushing NPAs under the carpet, it is mandatory to report even one-day defaults.

Modi said that the government is committed to strengthening the banking sector, and banking reforms in the country would continue.

The Union Budget, too, presented a roadmap for strengthening the financial sector along with expanding participation of private enterprise, and strengthening public sector institutions, Modi said. He added that the new Public Sector Enterprise policy includes the financial sector, and asserted that banking and insurance have a lot of potential in the economy.

Private enterprise is being promoted wherever possible, and effective participation of the public sector in banking and insurance is still needed in the country, Modi said.

To strengthen public sector banks, equity capital infusion is being given importance, Modi said. The government has allocated Rs 20,000 crore each for the current and next financial year for infusion in public sector banks.

Modi also said that the new asset reconstruction company is being created to keep track of banks’ NPAs, and will address loans in a focussed way. “This will strengthen public sector banks,” he said. 

He urged the sector to come up with innovative financial products for farmers and fishermen, among others, to free them from clutches of informal lending.

He said Self Help Groups have capabilities in manufacturing and services, and have good credit discipline. Their financial discipline makes them an ideal channel for investment in the rural infrastructure which can turn out to be good financial model for the sector, he said.