Union Finance Minister Arun Jaitley, in the wake of the investments made towards strengthening the banking system, on Sunday said that responsive and responsible banking must be encouraged to rejuvenate the system.
"Challenges that came before became those that came before the economy. Some part of lending within banks created a problem, and the whole system struggled to deal with this. However, we need give the system a nudge towards responsible and responsive banking," he said.
Addressing the plenary session of the PSB Manthan at the State Bank Academy here, Jaitley stated that recent reforms like digitisation and financial inclusion had had an impact on India's banking system, adding that a robust system of public sector banking (PSB) was essential to fuel India's growth.
"The steps taken in the last two years have directly impacted banking."
"While one is the success story of financial inclusion, the other one is digitisation. With the latter being the prime focus, more transactions will take place through banks, thus strengthening of the banking system. The Goods and Services Tax (GST) too has been an enabler, as credit requirements are now clear due to greater transparency," he added.
Hailing the Insolvency and Bankruptcy Code, 2016 as one that has "shaken the system," Jaitley claimed that this, unlike erstwhile "half-baked methodologies" had changed the relation between a debtor and creditor.
"There is more funding that is coming into the banking system for it to be in good health. The banking system forms the core of the economy, and is virtually indispensible. Banks must try and support the MSMEs primarily, as this is what counts for job creation and is need of finances. Compared to financial institutions everywhere else in the world, we have done well and will continue in that direction. We need to try and realise the growth rate that we are capable of achieving," he said.
Taking cognisance of the increasing competition in the sector, Jaitley claimed that PSBs stood out by virtue of the nature of their operations, adding that they formed an important part of agriculture, infrastructure, financial inclusion and other social schemes implemented by the government.
He further said due to the width of the network of PSBs, the option of undertaking lucrative business was not one that they could avail, adding that operations in less profitable areas could not be avoided due to socio-economic commitment.