India's finance minister Arun Jaitley promised more autonomy to state-run banks to run business with a “commercial mindset” while terming the level of bad assets in the system as "unacceptable."
"There are unacceptable levels of NPAs (non-performing assets) in some cases and the banks have to be given a sufficient amount of leeway ... to deal with commercial issues with a commercial mindset," Jaitley told reporters on the sidelines of a two-day bankers' retreat at Pune.
The finance minister said there was need to bring about changes in many areas in state-run banks, including giving "far greater autonomy" and allowing them to hire the best talent. The two-day banking conclave was held last week at a crucial time when India was moving towards accelerating the pace of growth, he said.
The government, which a majority owner in 27 public sector banks, that control over 70 per cent of the system, wants to hear the problems plaguing the sector from the bankers and external experts as "they know the best where the shoe pinches", he said. "I am certain this conference is going to pave a way for a new roadmap," he added.
The meeting comes at a time when the gross NPA in the system has touched 4.5 per cent in September 2014, and days after strong commentary from RBI about state-run lenders lagging behind their private sector rivals on asset quality management. The finance minister said there was a need for the banking sector to fund infrastructure and manufacturing sectors to support the ambitions of higher growth.
"There is a need now for the banking system in India in a big way to finance infrastructure, manufacturing and infuse liquidity. There is also a need to conceive several reforms in the banking sector," he added.
PM asks banks to embrace Swachh Bharat project
While speaking at the 60th year celebrations of ICICI in Mumbai, Prime Minister Narendra Modi invited the banking sector to embrace his pet Swachh Bharat project and asked them to finance young entrepreneurs willing to float ideas with hygiene, sanitation and cleanliness as the main themes. Modi said that ICICI Bank, the country's largest private sector bank, could think of funding at least 100,000 young entrepreneurs who are willing to work in areas like waste management, power generation from waste materials, public sanitation, etc over the next one year as it adds one more area of finance to its bouquet of offerings.
Modi also said that the top management of the bank should engage its people working at the grass roots level and decide how it can try to change the banking space in the country over the next 15 years, when it turns 75. “Decide what changes you can bring in for the nation...set a target for achieving those targets by the time India turns 75 in 2022 and also when the bank turns 75 in 2025,” he told the gathering.
The PM also dedicated to the nation Akodara, a village in Gujarat's Sabarkantha district, which was adopted by ICICI Bank and transformed into a fully digital village complete with technology-enabled banking, audio-visual teaching programmes in schools and vocational training for youths ready to join the workforce.
Complimenting the bank for their initiative, Modi said that there should be competition among banks to provide digital banking to people across the country . He also said that a cashless banking system has the potential to address the problem of black money in the country. The PM said that although we are a nation of savers, but the same is concentrated in gold. He asked banks to take financial security to a level which could eventually prompt people to shift from their habit of buying gold as their future security to keeping money in banks. “Banks could act as the agents for social transformation” the PM said.
