Pune: Prime Minister Narendra Modi today pledged not to interfere in the functioning of public sector banks, but wanted the lenders to be accountable failing which interventions in public interest could be made.
At the concluding session of the two-day bankers' meet ‘Gyan Sangam' to chalk out banking reforms, Modi also called for ending “lazy banking” and said banks must prioritise lending to employment-generating sectors.
While Finance Minister Arun Jaitley called for bold reforms, Reserve Bank Governor Raghuram Rajan emphasised on the need for cleaning up bad debts and possible Non-Performing Assets (NPAs) in the system within a year to bring the economy back on track.
Bankers on their part suggested that government ownership in PSBs should be brought down below 51 per cent over time as well as eliminate market distortions like loan waivers and interest rate caps for agriculture loans.
Briefing reporters about the deliberations, Financial Services Secretary Hasmukh Adhia said Modi has promised that the PSBs will not ever get “a call from Prime Minister's Office (PMO)” that may affect their working.
Calling upon the banking sector to establish banks which rank among the top of the global league, Modi said banks need to be run professionally and assured them that there would be no interference.
“But accountability is essential,” he said, adding that the government had no vested interest, and public sector banks can derive strength from this fact. Stating that India is a democracy, the Prime Minister said he is against political interference, but supports political intervention in the interest of the people. He said, “political intervention will enable the voice of the common man to reach such institution”.
In his remarks at the conference, Jaitley today assured bankers that government was ready to protect their commercial decisions as “risks have to be taken” by them.
The Finance Minister also said the government was willing to “reconsider the rules” to help banks reduce the non-performing assets (NPAs), which have become a major challenge for the banking industry.
“Government is open to bold decisions for professionalisation of the management and autonomy in decision making, rewarding merit, and relooking at the recruitment process at the top management level of PSBs,” Jaitley said.Rajan favoured channelising “full savings” of the households into the financial system so that requisite financial resources for growth could be made available.
“In the short term (from 0 to 12 months) there is need to clean up the NPAs and then restructure other stressed loans so as to put the economy back on the track,” Rajan said.
He also pitched that the bona fide mistakes made by the bankers while taking commercial decisions should be protected by the government.