Next 25 years in your hands, be the growth catalyst, Sitharaman tells bankers

Finance Minister NIrmala Sitharaman | Illustration: Moneycontrol

Finance Minister Nirmala Sitharaman on September 16 urged banks to think of strategies and fufil the credit requirements of the economy to meet the aspirations of a growing India for the next 25 years.

“We have so much and more to do, banking industry needs to serve the Amrit Kaal, we have to see how best we can lift ourselves to meet aspirations of a growing India,” Sitharaman said while delivering the keynote address at the annual general meeting of the Indian Banks’ Association in Mumbai.

She was referring to the next 25 years when India will celebrate 100 years of independence in 2047. The government says this period is the time for India to realise its potential and to take the lead in all spheres social as well as economic.

If India has to grow at a speed for the next 25 years, banks should play the role of a catalyst, she added.

Indian banks are just about recovering from the COVID-19 pandemic and the subsequent lockdowns. Banks had made adequate provisions and raised sufficient capital on their balance sheets to deal with stress.

As the impact of the pandemic wanes and the economy picks up pace, credit demand has picked up. According to Reserve Bank of India data, credit to industry grew 15.5 percent in August.

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Sitharaman said banks have gone through “test of fire” in terms of dealing with the COVID-19 pandemic and amalgamations. The government’s decision to merge banks was because of the need of larger, more optimally efficient banks, she added.

India’s economy, on the other hand, was “now looking up,” and the restoration of health of banks was recognised, she added.

Banks’ immediate priority should be detecting frauds and unusual transactions, tracking bad money, and alerting the government, Sitharaman said. At the same time, banks ensure that cyber security is taken care of, she added.

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Speaking on the occasion financial services secretary Sanjay Malhotra said that the banking industry was placed quite well overall, especially in terms of dealing with non-performing assets.

Going forward, credit growth should take place across all segments and not just in the retail sector, Malhotra said. Even as banks’ focus on retail loans continues, medium and small enterprises (MSME) and industrial sectors are also very important, the secretary added.

Additionally, while private sector banks contributed tremendously to credit growth, their contribution to financial inclusion schemes was low, Malhotra said. The secretary urged private sector banks to contribute more to the government’s financial inclusion schemes.