New Delhi: India’s banking sector has achieved historic levels of profitability through comprehensive and long-term reforms initiated by the Prime Minister Narendra Modi-led government, Finance Minister Nirmala Sitharaman said Friday.
In a series of posts on X (formerly Twitter), Sitharaman outlined the reforms introduced in the banking sector over the last 10 years and blamed the preceding Congress-led United Progressive Alliance (UPA) for turning the banking sector into “a cesspool of bad loans, vested interests, corruption and mismanagement” during its time in power.
“The banking sector is considered the backbone of a nation’s economy,” Sitharaman’s X post read. She added, “Recently, India’s banking sector achieved a significant milestone by recording its highest-ever net profit, crossing Rs 3 lakh crores.”
The FM said the origins of the Non-Performing Assets (NPA) crisis lay in the UPA’s practice of “phone banking” under which loans were disbursed to “undeserving businesses under pressure from UPA leaders and party functionaries”, resulting in a surge of NPAs.
Rigorous measures such as the 2015-16 Asset Quality Review helped disclose “hidden mountains of NPAs and ended the accounting tricks used to hide them”, she added.
The Finance Minister said that after the banks began transparently disclosing their NPAs for loans lent before 2014, the gross NPAs of public sector banks rose to a high of 14.6 percent in 2017-18.
Since then, the government has carried out several reforms, such as its comprehensive 4R strategy — Recognising NPAs transparently, Resolution and Recovery, Recapitalising PSBs, and Reforms, she added.
Other reforms include the Mission Indradhanush scheme for the recapitalisation of banks in 2014, the Banks Board Bureau started in February 2016, and legislation such as the Insolvency & Bankruptcy Code, 2016.
“Between 2014 and 2023, banks recovered more than Rs 10 lakh crores from bad loans,” she said.
The Enforcement Directorate “has investigated around 1,105 bank fraud cases, which resulted in the attachment of proceeds of crime amounting to Rs 64,920 crores. As of December 2023, assets amounting to Rs 15,183 crores have been restituted to the PSBs”, she added.
Moreover, Sitharaman lauded the turnaround of public sector banks (PSBs), saying they recorded the highest-ever net profit amounting to Rs 1.41 lakh crore in 2023-24, four-fold the profits recorded in FY 2013-14.
Public sector banks have also seen a significant decline in NPAs, said the Finance Minister, adding that their net NPAs fell to 0.76 percent as of March 2024 from 3.92 percent as of March 2015 and reached a peak of 7.97 percent in March 2018.
The Finance Minister further pointed out the pivotal role of agriculture in India’s economy, noting the substantial increase in agricultural credit.
“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,” she said, highlighting the widespread adoption of the Kisan Credit Card scheme, with over 7.36 crore operational KCC accounts.
Additionally, she reiterated the government’s commitment to financial inclusion through schemes such as the PM Jan Dhan, Jan Suraksha, Atal Pension, and PM MUDRA.
Sitharaman said the government is dedicated to fostering entrepreneurship and financial independence through a stabilised banking system, “ensuring banks’ support India’s growth path to Viksit Bharat by 2047”.
(Edited by Madhurita Goswami)
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