‘Economy growth tied to credit ability’
Finance Minister Arun Jaitley said on Thursday it was necessary to keep public sector banks in good health as they were the lifelines of the economy.
Speaking at an event organised by the Indian Banks’ Association, Mr. Jaitley said: “If their [PSBs] health is not good, then the economy at large will also suffer. The worst in the banking system is now behind us.” “Reforms were long overdue in the banking system. Some reforms are born out of compulsion, while there are many others which are born out of conviction. For the government, it is a combination of both,” he added.
The growth of the economy depends on the PSBs’ ability to extend credit to the market and maintain sufficient liquidity, he said. “If that doesn’t happen, then the economy as a whole will shrink”.
Mr. Jaitley said the Insolvency and Bankruptcy Code had brought back close to ₹3 lakh crore into the banking system.
“For the last two or three quarters, the NPA curve is going down,” he said. “The NPAs didn’t go up because banks made some strong decisions in the recent past. The NPAs went up because of truthful disclosure. There was no hiding under the carpet any more.”
“With the functional autonomy available with PSBs, the future years will see a far greater contribution by PSBs as far as the national economy is concerned,” Mr. Jaitley added. “The PSBs are now functioning under a competitive environment. From a commercial point of view, you are still bound by certain restrictions. Your public and social responsibility is much higher than what the private sector competitors have with them,” Mr. Jaitley said.