Banking sector strong today due to current regime's reforms: PM Modi

Banks have to adopt a partnership model and reach out to their customers in a proactive manner, Modi said

Reforms undertaken by the National Democratic Alliance (NDA) government in the last 6-7 years in the Indian banking industry has ensured that the sector is in a very strong position today, Prime Minister Narendra Modi said on Thursday.

Addressing a conference on “Creating Synergies for seamless credit flow & economic growth”, the PM said, “ … reforms initiated by the government in the banking sector in the last 6-7 years, supported the banking sector in every way, due to which the banking sector of the country is in a very strong position today.

Financial health of the banking sector has also improved a great deal as the non-performing asset (NPA) burden of the banks eased considerably in the last few years, post the clean-up balance sheets undertaken by the banks due to the asset quality review.

Modi said, banks have to adopt a partnership model and reach out to their customers in a proactive manner. Rather than waiting for customers to come to the branches with their needs, the banks need to customise solutions for customers, companies, and MSMEs and reach out to them analysing their requirements.

“Banks have to do away with the feeling that they are approver and the customer is an applicant, they are giver and client a receiver”, the PM said, addressing the bankers.

Due to the major changes that have taken place in the country and the schemes that have been implemented, a huge pool of data has been created in the country and it is important that the banking sector takes advantage of it.  Stressing on the fact that the scale at which corporates and start-ups are coming forward today is unprecedented, the PM said, it is the best time for the banking sector to fund and invest in India’s aspirations.

He also asked the banks to get involved in the growth story proactively. “Under the PLI scheme the manufacturers have been incentivized to increase their capacity manifold and transform themselves into global companies. Banks can play a big role in making projects viable through their support and expertise”, the PM said.

Modi said, the problems plaguing the banking sector pre-2014 have been addressed one by one by the current regime. “We addressed the NPA issue, recapitalised the public sector banks, brought in the insolvency and bankruptcy code, brought in reforms in a number of other laws, strengthened the debt recovery tribunals, and set up a dedicated stressed asset management vertical during Covid”, he added.

It is because of these decisions that the resolution and recovery mechanism of the banking industry has improved considerably. Banks have recovered around Rs 5 trillion from bad assets that were lent during the previous governments, PM said. The recoveries will be further accentuated with the formation of the National Asset Reconstruction Company Limited (NARCL). Around Rs 2 trillion worth of stressed assets may get resolved, going forward, he added.

Speaking on the consolidation of public sector banks, wherein the government merged smaller state-owned banks with their larger counterparts, the PM said, the efficacy of the banking sector has increased manifold and they are better placed to raise funds from the market.

It is because of all the reforms undertaken by the government; the capital position of the banks has improved. The NPA burden of the public sector banks is the lowest in the last five years, Modi said. Banks can play a big role in giving a push to the Indian economy and strengthening it, he further added.

“The banks have to be proactive in not only increasing their balance sheet but also in increasing the country’s balance sheet”, the PM said.