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Informist, Friday, Oct. 4, 2024

 

--Sitharaman: Fincl system well capitalised to fuel productive credit 

--Sitharaman: See sharp gaps in access to financial services narrowing 

--Sitharaman: NPA ratio of banks at multi-year low 

--Sitharaman: Robust bank sector reflected by low NPAs, rising profitability

 

NEW DELHI – India's financial sector is well capitalised to fuel productive credit, which is a key force that will shape the next era of robust growth, Finance Minister Nirmala Sitharaman said Friday. The robustness of the financial sector is one of the four key standpoints that will be unique to India's economic rise in the next decade, Sitharaman said at the third Kautilya Economic Conclave. 

"India's financial market has evolved into a competent system whose crisis management, regulatory, and governance standards are at par with those of developed financial markets," Sitharaman said, adding that while reforms and developments have been carried out, the financial sector has remained nimble to the growing needs of a developing country as it widened its scale and scope of financial inclusion.

 

In her Budget speech for 2024-25 (Apr-Mar), Sitharaman had said that the government planned to bring out a document to set the vision and strategy for the financial sector, which would aim to prepare the sector in terms of size, capacity and skills. The document would set the agenda for the sector for the next five years and guide the government, regulators, financial institutions, and market participants, she had said. The document is yet to be published.

 

The government's thrust on creating a capitalised financial environment comes against the backdrop of growing infrastructure spending as well as domestic value creation. 

 

Sitharaman also said there has been a sharp narrowing of gaps in financial access over the past decade. At a recent event, Swaminathan J., deputy governor of the Reserve Bank of India, had said that while financial inclusion in India had improved over the years, there was still a lot of ground to cover to make banking and financial services accessible to everyone. Although there has been an improvement in credit access to priority sectors, various gaps had to be addressed, especially those pertaining to micro, small, and medium enterprises, he had said. 

 

The Prime Minister Modi-led government has been working on improving financial inclusion, and has brought in various flagship schemes for this, including the Pradhan Mantri Jan Dhan Yojana, the Pradhan Mantri Jeevan Jyoti Bima Yojana, the Pradhan Mantri Suraksha Bima Yojana, and the Atal Pension Yojana. 

 

Sitharaman also spoke about the soundness of the banking sector, which has been underpinned by a sustained policy focus on asset quality improvements, enhanced provisioning for bad loans, sustained capital adequacy, and a rise in profitability.

 

According to the RBI's Financial Stability Report for the month of June, the gross non-performing asset ratio of scheduled commercial banks improved to a 12-year low of 2.8% as on Mar 31. The net non-performing asset ratio declined to a record low of 0.6% as of March-end, RBI said in the report. It added that the improvement in banks' asset quality was broad-based.

 

"NPA ratios are at a multi-year low, and banks now have efficient debt recovery mechanisms," Sitharaman said. The Department of Financial Services has been taking steps to improve the debt recovery of banks, which has been rather poor. 

 

Cases worth around INR 13 trillion are pending with debt recovery tribunals, with only a little recovery seen in high-value cases in the last one and a half years – INR 600 billion by the tribunal's Mumbai bench, INR 400 billion by the Delhi bench, and INR 340 billion by the Chennai bench, a senior ministry official had told Informist last month.  End

 

Reported by Priyasmita Dutta

Edited by Avishek Dutta

 

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