Prime Minister Narendra Modi on Friday asked lenders to boost credit flow
to critical as well as new sectors to satiate the growing appetite of a fastrecuperating economy, with an assurance that public-sector bankers won’t
be harassed for honest business mistakes. He also promised further reforms
in the financial services space.
Modi said the government recognises the cycle of ups and downs faced by
businesses. So, it doesn’t harbour the thinking that all transactional
decisions by bankers are done with mala-fide intent and amount to
malfeasance.
“The government’s responsibility is to stand with all such business decisions
taken with good intent and I want to say this to all those in the financial
sector that I will stand by you for all decisions taken with honest intent,”
Modi added.
The economy is recovering from the Covid-induced shocks and is expected
to reverse a slide next fiscal to grow in the range of 10% to 13.7%. A massive
credit push is thus required for businesses to resume operations without
hiccups.
Modi was speaking at a webinar, attended by finance minister Nirmala
Sitharaman, principal secretary to the Prime Minister PK Mishra, minister
of state for finance Anurag Thakur, financial services secretary Debasish
Panda and other stakeholders.
The statement comes at a time when non-food credit growth has slowed
even as businesses are going through a reset phase following a substantial
easing of lockdown curbs. Growth in non-food dropped 5.92% year-on-year
in the fortnight through January 29 from 6.35% in the previous fortnight.
The financial sector, the Prime Minister said, was hurt 10-12 years ago due
to “aggressive lending”. Steps have been taken to take the country out of this
non-transparent credit culture. “Today instead of brushing NPAs under the
carpet, we have made it mandatory to report default on day one,” he said.
The RBI data released last month showed credit to industry shrank by 1.2%
in December 2020, against a 1.6% rise a year before, mainly due to a
contraction in loans to large industries by 2.4%. This is way below the 5.9% non-food bank credit growth recorded in December, even though this
growth rate, too, was lower than the December 2019 level of 7%.
However, credit to medium industries registered a robust growth of 15.3%
in December, mainly due to the government’s guarantee on loans to them
under a `3-lakh-crore scheme announced after the pandemic. Modi said as
many as 90 lakh micro, small and medium enterprises were given credit
worth `2.4 lakh crore in the aftermath of the pandemic.
As for reforms, Modi highlighted the Budget commitment to privatise two
state-run banks and raise foreign direct investment (FDI) in insurance to
74% from 49%. The proposed development finance institution will help
bolster infrastructure creation. The Prime Minister said the public sector
needs to further entrench their presence in banking and insurance to
support the poor, even though the government is stepping up efforts to
promote the private sector as well.
“As our economy is growing, and growing fast, credit flow has also become
equally important. You have to see how credit reaches new sectors, new
entrepreneurs. Now you will have to focus on creation of new and better
financial products for start-ups and Fintech,” Modi said.
Stressing that millions of small farmers came out of the clutch of informal
lending channels due to the introduction of the Kisan credit cards, the Prime
Minister asked lenders to focus on similar innovative financial products to
help the poor and the vulnerable.
As many as 130 crore people have Aadhaar cards now and 41 crore have Jan
Dhan accounts, of which 55% are women. Highlighting the need to further
bolster financial inclusion through the use of technology, he said on an
average Rs 4 lakh crore worth transactions are being undertaken through
UPI platform every month and there are 60 crore RuPay card holders.
Loans worth as much as `15 lakh crore have been extended through the
MUDRA scheme. Around Rs 1.15 lakh crore have been deposited in 11 crore
farmer families through the PM Kisan scheme, he said.
Source: The Financial Express, India Monday, 01 March 2021