PM Narendra Modi urges banks to lend to start-ups and MSMEs amid Covid-19

Calls for effective participation of public sector in banking and insurance

Prime Minister Narendra Modi on Friday urged banks to lend to start-ups and micro, small and medium enterprises (MSMEs), hit hardest by the Covid-19 pandemic.

“As our economy is growing, credit flow has also become equally important. You have to see how credit reaches new sectors, new entrepreneurs,” Modi said while addressing a webinar on effective implementation of Budget announcements for financial services. “Supporting MSMEs and start-ups and expanding credit flow to them is necessary.”

Amid the pandemic, the government has extended credit worth Rs 2.4 trillion to 9 million MSMEs. “Now it’s the responsibility of the financial sector to understand the aspirations of rural and smaller cities and make them the strength of Aatmanirbhar Bharat.”

He said the government’s priority is to ensure that depositors and investors have trust in the financial sector by making it transparent.

“The old ways and old systems of banking and non-banking sectors are being changed,” said Modi, adding the government has taken steps to free the country from non-transparent credit culture.

The banking sector was severely harmed 12 years ago due to aggressive lending practices. He said now, instead of brushing the non-performing assets (NPAs) under the carpet, it is mandatory to report even one-day NPA.

Emphasising the government's committed to strengthening the banking sector, he said reforms in the sector would continue.

The Union Budget, too, presented a road map for strengthening the financial sector along with expanding participation of the private sector, and strengthening public sector institutions, Modi said.

On the new Public Sector Enterprises policy, he said it includes the financial sector, and banking and insurance sector has a lot of potential.

Private enterprises are being promoted wherever possible, but effective participation of the public sector in banking and insurance is needed, Modi said.

Pointing out the importance given to equity capital infusion, he said it is being done to strengthen public sector banks. The government has allocated Rs 20,000 crore each for the current and next financial year as infusion in public sector banks.

Modi said an 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. Lauding the Self Help Groups, he said they 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.