Talking about the reforms of Public Sector Banks (PSBs), he said that culmination of reforms was long overdue in the banking system. Jaitley said that some reforms are born-out of compulsion while there are many others which are born-out of conviction. He admitted that for the Government, it was a combination of both. The growth of our economy depends on PSBs ability to flow credit to the market and maintain sufficient liquidity. If that doesn't happen, the economy as a whole will shrink. To keep economy in good health, PSBs are simply necessary. The Finance Minister said that the worst in banking system is now behind us. Our fast growing economy needs to develop into a developed society and to do that, it is imperative that we must also be an ethical society. Jaitley said with conviction that in evolution of India into a more ethical society, the last five years will go down in history as a turning point.
Talking about the success of Insolvency & Bankruptcy Code (IBC), Jaitley said that everybody concedes that IBC is a success story. It has brought back close to Rs. 3 lakh crore back into the banking system. All institutions have played a role in the success of the IBC. He 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, the Minister added.
On the issue of Non-Performing Assets (NPA), Jaitley said that for the last two or three quarters, the NPA curve is going down. The NPA didn't go-up because banks made some strong decisions in the recent past. The NPA went-up because of truthful disclosure. There was no hiding under the carpet any more. He expressed happiness over the fact that several banks were recently-out of the Prompt Corrective Action (PCA) norms. Jaitley said he is sure other PSBs will also try and improve their measures too. The finance minister reiterated the Government's commitment to support PSBs in order to have emergence of a much healthier banking system in years to come.
Praising the right environment for growth available with the PSBs, Jaitley said that 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. The PSB banks are now functioning under a competitive environment. From a commercial point of view, you are still bound by certain restrictions. Your public and social responsibility is much higher than what the private sector competitors have with them. And that is a responsibility naturally invested in you. 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.
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