Finance Minister Nirmala Sitharaman in a long post in X drew a parallel for the banking sectors' performance during the UPA government and the NDA government.
India's banking sector has reached a significant milestone, recording its highest-ever net profit, exceeding ₹3 lakh crores. As per Sitharaman, this achievement marks a dramatic turnaround from the pre-2014 era when the sector struggled with bad loans and mismanagement under the UPA government. Finance Minister Nirmala Sitharaman credits this success to the Modi government's comprehensive reforms and decisive leadership.
Sitharaman highlights the challenges inherited from the UPA regime, where loans were often granted based on powerful connections rather than sound business propositions. This practice led to a surge in Non-Performing Assets (NPAs) and created a "Twin Balance Sheet" problem. Under the UPA, NPAs rose significantly, and banks faced substantial losses and capital erosion, hindering credit growth essential for economic development.
The Modi government implemented a strategic 4R’s approach: Recognising NPAs transparently, Resolution and Recovery, Recapitalising PSBs, and Reforms. These measures aimed to address credit discipline, responsible lending, and improved governance. Key reforms included the creation of the Banks Board Bureau (BBB) for transparent selection of bank directors, the Insolvency & Bankruptcy Code (IBC) for faster recoveries, and the Fugitive Economic Offenders Act of 2018 for seizing assets of economic offenders.
As per the Finance Minister, due to these reforms, the financial health of Public Sector Banks (PSBs) has improved markedly. In FY 2023-24, PSBs recorded a net profit of ₹1.41 lakh crores, almost four times higher than in FY 2014. Net NPAs declined to 0.76% from a peak of 7.97% in 2018, and gross NPA ratios also dropped significantly. Credit growth reached a decade-high of 16% in FY24, indicating a robust banking sector.
Finance Minister Nirmala Sitharaman also pointed out that the Modi government has prioritized financial inclusion through schemes like Jan Dhan and MUDRA, which have expanded banking access to millions. Over 52 crore Jan Dhan accounts have been opened, with significant deposits and a large percentage belonging to women and rural residents.
In conclusion, Sitharaman emphasized the government's ongoing commitment to strengthening the banking sector, ensuring it supports India's path to becoming a developed nation by 2047. The reforms have transformed banks into pillars of public welfare, driving financial inclusion and economic growth.
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