Urgent need to scale up banking, need at least 4-5 more SBI sized banks: Nirmala Sitharaman
FM Nirmala Sitharaman said there was an urgent need to scale up banking to meet the growing needs of the industry and also to ensure that all economic centres of the country are covered with at least one physical or digital banking presence.
Finance Minister Nirmala Sitharaman while addressing the 74th Annual General Meeting of the Indian Bank’s Association (IBA) in Mumbai on Sunday said India needs a lot more banks and a lot more large-sized ones to meet the growing needs of the country needs in the path of making a smart recovery post pandemic disruption.
She said the banks will derive benefits of a vibrant economy going forward, however, India needs not only more but bigger lenders to meet the changing requirements owing to the new challenges that have emerged recently.
According to Sitharaman, understanding the credit needs of micro, small, and medium enterprises (MSMEs) and catering to them with a different approach that took banks ‘some time’.
“Couple of years ago, the gripe was that MSMEs and their requirements were never understood because you (banks) looked at them as only a cameo of larger businesses which they were not. It took you some time but you did change and understood that the needs and the cash flow structure of an MSME were different. Therefore, you had to cater to them with a different kind of approach.”
Speaking further Sitharaman said there was an urgent need to scale up banking to meet the growing needs of the industry and also to ensure that all economic centres of the country are covered with at least one physical or digital banking presence.
"We need to scale up banking. The need is for at least four-five more SBI sized banks," she said, while reminding that the amalgamation exercise among public sector banks have helped in moving ahead with the creation of large banks.
The Finance Minister a few days back had announced the setting up of the National Asset Reconstruction Company Ltd (NARCL) which is mandated to resolve India’s bad loan woes within five years, beyond which the guarantee to be issued by the government would expire.
The Cabinet had also approved a government guarantee of Rs 30,600 crore to be provided for the security receipts issued by the NARCL to buy bad loans of lenders.
Sitharaman asked banks to be nimble to understand their customer’s requirements and their nature of exports citing the government’s export target of $400 billion in FY21 and $2 trillion by 2030 of which $1 trillion is merchandise goods exports and the other $1 trillion is service exports.
The Minister noted, “If the (export) target is $400 billion within a year, it cannot happen unless banks are going to be nimble. Identify your (banks) export customers, make sure you understand the nature of their business and the countries to which they are exporting. Therefore, you need to have a lot more understanding of each of the businesses.