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The proposed payments banks, for which the Reserve Bank of India (RBI) provided licences to 11 companies earlier this week, will change the country's banking habits, Finance Minister Arun Jaitley said on Friday.
“It will change the way people think, change the way they keep the money, where they keep their money, the way they pay,” he said at an Indian Bank event.
Adding: “Using banks for all transactions, small and middle, will become a habit of the people. More and more outside of the regular economy will get into the economy. This in itself will be a big game-changer as far as Indian habits and the Indian economy are concerned.”
RBI, earlier this week, gave an ‘in principle’ nod to 11 entities, including the department of posts, Reliance Industries, Aditya Birla Nuvo, Vodafone and Airtel, to set up such banks. And, proposed such licences ‘on tap’ in future.
The licence will allow companies to collect deposits (initially up to Rs 1 lakh per individual), do internet banking, facilitate money transfers, and sell insurance and mutual funds. ATM/debit cards can be issued but not credit cards.
The finance minister also said the levels of bad loans in public sector banks (PSBs) were “unacceptable”. “NPAs (non-performing assets) reached this level partly because of indiscretion, partly because of inaction and partly because of challenges in some sectors of the economy, which were evident through the high NPA levels in these sectors,” he said.
PSBs’ gross NPAs were Rs 2.67 lakh crore at end-March, about 86 per cent of the gross NPAs for the entire banking system, at Rs 3.09 lakh crore.
Expressing confidence that banks would be able to address these challenges over the next few quarters, Jaitley said, "An all-out effort has been launched to correct the health and bring NPAs down."
These included "efforts by the bank administration, the effort by the government to infuse more capital, the effort to get more finance by divesting government holding, and then greater discretion and more important, addressing the concerns of each of (stressed) sectors.”
"And, I don't have a doubt that over the next few quarters, banks will be able to address these challenges," Jaitley said.
Global agency Moody's says Indian banks will continue to reel under the impact of bad loans in the current financial year, although new NPA growth might decline.
RBI has predicted that gross NPAs are likely to increase to 4.8 per cent of the total by next month, from 4.6 per cent per cent in March. For PSBs alone, gross NPAs were 5.2 per cent of the total on March 31.
The finance minister further said the government's plan to infuse capital into PSBs over the next four years would "infuse a lot of financial strength" to deal with the bad loan problem. Of the Rs 1.8 lakh crore capital requirement estimated by the ministry for state-run banks, the government would be providing Rs 70,000 crore -- Rs 25,000 crore each in the current and the next financial years, and Rs 10,000 crore each in 2017-18 and 2018-19.
Jaitley further said the new system to hire best talent for the top posts, including from the private sector, would go a long way in improving the performance of state-run banks. "Managements are going to be increasingly professionalised. The fact that the government administers them does not mean the government can appoint anyone. Therefore, a very strict appointment procedure, to get the best talent from within and outside, has now been followed," he said.
