Public Sector Banks are lifeline of Indian Economy

Last Updated on April 12, 2019 by Bharat Saini

Insolvency & Bankruptcy Code (IBC), is a success story that everybody concedes, it has brought back close to ₹3 lakh crore back into the banking system, Union Minister of Finance & Corporate Affairs, Arun Jaitley said at the conference on ‘Reforms Journey for EASE in Public Sector Banks (PSBs)”, organised by Indian Banks’ Association (IBA) on Thursday 28 February 2019 in New Delhi. All institutions have played a role in the success of the IBC. Jaitley attributed the IBC success to the Government keeping an arm’s length distance from the processes which various institutions and Committee of Creditors and others follow, and allow their decision to be guided by merit and highest quality of professionalism. If there is one such interference, it is capable of discrediting the whole process and bringing a bad name to a wonderful reform.

Sunil Mehta, Chairperson, Indian Banks’ Association (IBA), in his Welcome Address said that IBC has changed the way banks function now. IBC has changed the creditor-debtor relationship and banks position has changed from one at the receiving end to being at the delivery end. Now financial absconders want to pay after defaults rather than facing civil liabilities.

Enhanced Access and Service Excellence (EASE) Index Report was unveiled by Jaitley on the occasion and the best-performing Public Sector Banks as per the EASE Reforms Agenda and gave away awards in various categories to the best performing PSBs.

“Culmination of reforms was long overdue in the banking system. Some reforms are born out of compulsion, while there are many others which are born out of conviction. For the government, it is a combination of both”, Jaitley further said.

• Public Sector Banks (PSBs) are the lifeline of Indian economy, if their health is not good, then economy at large will also suffer.
• The worst in the banking system is now behind us.
• The growth of our economy depends on PSBs’ ability to flow credit to the market and maintain sufficient liquidity.
• Non-Performing Assets (NPA) curve is going down for the last two or three quarters, the NPA.
• NPA didn’t go-up because banks made some strong decisions in the recent past.
• NPA went-up because of truthful disclosure.
• NPA are not being hidden under the carpet any more.
• Several banks were recently-out of the Prompt Corrective Action (PCA)
• Other PSBs will also try and improve their measures too.
• Government is committed to support PSBs in order to have emergence of a much healthier banking system in years to come.
• There is the right environment for growth available with the PSBs.
• With the functional autonomy available with PSBs, the future years will see a far greater contribution by PSBs as far as the national economy is concerned.
• PSBs are now functioning under a competitive environment.
• PSBs are still bound by certain restrictions from a commercial point of view.
• PSBs’ public and social responsibility is much higher than what the private sector competitors have with them. And that is a responsibility naturally invested in them.
• PSBS don’t enjoy the same level of freedom that private sectors banks enjoy.
• Despite these obvious restraints, these EASE norms will prove to be an important milestone as far as PSBs are concerned.

Giving an overview of the financial sector at the event Rajeev Kumar, Secretary, Department of Financial Services (DFS), said that the entire banking system has been rebooted in the last few years. A system had to be developed to measure each bank on the Reform Agenda. The parameters of Customer Responsiveness, Responsible Banking, Credit Off-take, Support to MSMEs, Deepening Financial Inclusion & Digitalisation and HR reforms were introduced in the Banking System. Kumar said that by way of presenting the EASE Reforms Index, Reform Agenda is institutionalised and it will function as the Report Card for PSBs.

Giving his assessment on the stress in the banking sector, Kumar said that Gross Non-Performing Assets (GNPA) has already reduced to ₹31000 crore. This means that it has peaked. Simultaneously, close to ₹2.87 lakh crore have been recovered by the PSBs of which ₹98493 crore have been recovered in first three quarters of FY 2018-19.