He promises to pursue more banking reforms.
While the government was promoting private enterprises wherever possible, India still needed an effective presence of public sector banks and insurers and the government would continue with banking reforms to strengthen the financial system, Prime Minister Narendra Modi said on Friday.
“Our top priority is to ensure that the depositor as well as the investor experiences trust and transparency. The old ways and old systems of banking and non-banking sectors are being changed,” Mr Modi said, pointing to the ‘severe harm’ done to the banking and financial sector ‘10-12 years ago in the name of aggressive lending.’
Mr. Modi was addressing a webinar on effective implementation of Budget provisions regarding financial services.
The government, he said, had taken steps to free the country from a ‘non-transparent credit culture’ where non-performing assets (NPAs) were brushed under the carpet.
“We understand the uncertainties of the business and recognise that every business decision is not underlined by bad intentions. In such a scenario, it is the responsibility of the government to stand by business decisions taken with clear conscience, we are doing this and will continue to do so,” he stated.
The new policy of disinvestment of public sector enterprises covered the financial sector as well, and private enterprises were being promoted wherever possible, he noted.
Equity capital infusion
“Still, along with this, an effective participation of the public sector in banking and insurance is still needed by the country. To strengthen the public sector, equity capital infusion is being emphasised. Simultaneously, a new ARC (asset reconstruction company) structure is being created which will keep track of the NPAs of banks and will address loans in a focussed way,” he said, adding that the ARC would strengthen the public sector banks.
Mr. Modi argued that the financial sector was critical to achieve the Atma Nirbhar Bharat vision, which included the creation of modern infrastructure. The government was committed to carrying out further reforms in the banking sector.
Mr. Modi also urged financial sector entities to create innovative financial products for farmers, small vendors and micro, small and medium enterprises.
“Self Help Groups’ capability from services to manufacturing and their financial discipline make them an ideal channel for investment in the rural infrastructure. It is not just a welfare issue but also a great business model,” he pointed out.
