Predicting that India might become the fifth largest economy in the world next year, Union Finance Minister Arun Jaitley said on Monday that given the kind of economic activity happening in India, the banking industry would play a vital role in strengthening the economy.
Addressing 71st Annual General Meeting (AGM) of the Indian Banks Association (IBA) held here through video-conferencing from New Delhi, Jaitley said that India was continuing its run as a fast-growing economy and that it would continue to be in this sweet spot.
The Minister said that the challenges to the economy were primarily external, citing unpredictable oil prices, trade wars and sporadic political issues. “Hence it is imperative that the domestic sector is equipped to deal with these external factors,” he said.
The Minister exhorted the banking industry to uphold professionalism, credibility and expansion and to use the AGM to introspect and prepare a blueprint for the long-term growth.
Jaitley said that banks played a vital role in job creation, infrastructure development, agricultural credit and others, making it the lifeline of the economy. “This makes it imperative to strengthen the credibility of the sector. The onus is on banks to avoid even stray incidents of frauds,” he said
Maintaining that the desire to have a high growth rate must be accompanied by strong macroeconomic fundamentals, Jaitley advised the banking industry against sacrificing the fundamentals for temporary spurt in growth and called for growth with fiscal prudence.
The minister lamented that indiscriminate lending done in the past had created a situation where borrowers were not able to service those debts.
Averring that the subsequent error of dressing up the bad loans had added to the problem and the excessive fear of consequences in the old regime led to a situation where the problem could not be resolved.
Jaitley said that the creation of the Insolvency & Bankruptcy Code had redefined the creditor-lender relationship in India and the need of the hour was to expedite the process.
The minister said that the amendment to Section 29A of Insolvency and Bankruptcy Code wouldl prevent defaulting promoters from bidding for their own assets. "In the pre-liberalization era, Prevention of Corruption Act (PCA) did not attract the penal provisions for corruption. But the amended PCA empowers civil servants in making bonafide bold decisions, thereby empowering bankers and other decision makers too," he said.
Dwelling upon the growth of the banking sector and its role in the growth of the economy, Jaitley said that the achievements of Jan Dhan Yojana, MUDRA Yojana and the low-cost insurance schemes are commendable. He added that it is no small achievement for the banking sector to have reached every household.
The minister said that the banking institutions are the heart and soul of the economy and that the contribution of the banking sector towards nation-building, especially in terms of support to industry, was invaluable.
IBA chairman Shyam Srinivasan said that his association had played a vital role in helping banks deal with the challenges of the times and to stay relevant. Other officials of IBA and leading bankers were present at the occasion.