ED attached Rs 64,920 crore in 1,105 bank frauds, FM says on revival of PSU lenders

Finance Minister Nirmala Sitharaman

The Enforcement Directorate has attached Rs 64,920 crore from around 1,105 bank fraud cases so far, Finance Minister Nirmala Sitharaman reiterated in in a thread of posts on the social media platform X on May 31.

“As of December 2023, assets amounting to Rs 15,183 crore have been restituted to the public sector banks (PSBs). There has been no leniency in recovering bad loans and the process is ongoing,” the finance minister said.

The banking sector, considered the backbone of a nation’s economy, recently achieved a significant milestone by recording its highest-ever net profit, crossing Rs 3 lakh crore in 2023-24, up from Rs 2.2 lakh crore in FY23.

During FY 2023-24, public sector banks recorded the highest-ever aggregate net profit of Rs 1.41 lakh crore, a four-fold surge over Rs 36,270 crore in FY 2014. The lenders declared a dividend of Rs 27,830 crore to their shareholders in FY24. Net NPAs of the state-run banks declined to 0.76 percent in March 2024 from 3.92 percent in March 2015, and from a peak of 7.97 percent in March 2018, she said.

Banks previously placed under the RBI's Prompt Corrective Action (PCA) framework have shown significant improvement, leading to the removal of all PCA restrictions. Due to reforms, the public sector lenders' ability to raise capital (equity and bonds) has improved. The PSBs have mobilised Rs 4.34 lakh crore from the market between FY 2014-15 and FY 2023-24, she said.

Access to credit is essential for nurturing entrepreneurship, self-employment and financial independence. Bank Credit growth (non-food) was 16 percent in FY24, the highest in the last 10 years. “Agricultural credit has increased 2.5-fold to Rs 21.55 lakh crore in FY 2022-23 from Rs 8.45 lakh crore in FY 2014-15. The Kisan Credit Card (KCC) scheme has provided timely and hassle-free credit to farmers, with over 7.36 crore operative KCC accounts,” the finance minister said.

Under PM MUDRA Yojana, loans worth Rs 28 lakh crore have been disbursed to over 48 crore people, with 68 percent of loans granted to women. Despite unfounded concerns shown by critics during the launch, NPAs under MUDRA are below 3 percent, reflecting the scheme's success, the post said.

Similarly, PM SVANidhi was launched to integrate urban Street Vendors into the formal economy. Loans worth over Rs 11,400 crore have been disbursed to 78 lakh street vendors, reducing their reliance on high-interest loans.

Stand-Up India Scheme has helped SC/ST individuals and women become self-reliant, with loans worth Rs 27,806 crore disbursed to over 2.28 lakh beneficiaries, Sitharaman said.

There are over 52 crore PM Jan Dhan accounts with deposits exceeding Rs 2.31 lakh crore. Over 55 percent of Jan Dhan accounts belong to women, and more than 66 percent are in rural areas. During Covid, 20.64 crore women received money directly into their Jan Dhan accounts, she added.

Banks under Congress regime

“The ‘seeds’ of the NPA crisis were sown during the Congress-led UPA era through ‘phone banking’, when loans were given to undeserving businesses under pressure from UPA leaders and party functionaries. Banks were forced to neglect proper due diligence and risk assessment before sanctioning these loans,” Sithraman said.

This led to a massive increase in bad debt and institutionalised graft. Many banks hid and avoided reporting their NPA by evergreening or restructuring them. "Various measures by our government and the RBI, such as the asset quality review, disclosed hidden mountains of NPAs and ended the accounting tricks used to hide them," she added.

"The Congress-era reckless and imprudent lending created the disgraceful legacy of the ‘Twin Balance Sheet’ problem, which we inherited in 2014," she said.

Twin balance sheet problem is when banks are under severe stress while the corporates are overleveraged to the extent that they cannot repay their loans.

Two former RBI governors have openly exposed the level of decay in the system left by the UPA regime. Raghuram Rajan, who also participated in Rahul Gandhi’s ‘Bharat Jodo Yatra’ described the NPA crisis during the UPA era as a “historic phenomenon of irrational exuberance”.

Similarly, former Governor Urjit Patel noted that the functioning of PSBs under the UPA suffered from “a perennial shortcoming on account of bureaucratic inertia and political meddling.”

Reforms brought in

Banks Board Bureau (BBB) was created for transparent selection of non-executive Chairpersons and whole-time directors. Mission Indradhanush, provided for re-capitalisation of PSBs, infusing over Rs 3.10 lakh crore. The Insolvency an d Bankruptcy Code (IBC) was brought for faster recoveries.