New Delhi: The Congress on Wednesday alleged the Modi government had destroyed public sector banks and other financial institutions in India to mess up the $2 trillion banking sector and was also protecting wilful loan defaulters.
Pointing out that Prime Minister Narendra Modi had met with CEO and other top executives of India’s banking sector during the day, Congress spokesperson Randeep Singh Surjewala said: “We hope they had the gumption to tell the PM how his government has destroyed the banking sector and financial institutions.”
The Congress said three important events in the last one week reflect the “miserable state” of India’s financial system and the banking sector.
The RBI’s Financial Stability Report for July 2020 warned that bad loans of the banking sector can reach a “20-year high; former RBI Governor Urjit Patel’s revelation that while the RBI wanted to be tough against loan defaulters, the Modi government wanted him to “go soft”; and former RBI Deputy Governor Viral Acharya’s tell-all book’s disclosure on the government’s mismanagement in making the entire financial sector ‘unstable’, ‘risky’ and on the ‘verge of collapse’.
The Congress leader alleged that India’s financial sector had collapsed under the Modi government and the NPAs had increased to Rs 9,35,000 crore as in September 2019 (9.1%) as against NPAs of Rs 2,16,739 crore (3.8% of total loans) in March 2013-14.
“With the Banks not allowed to recover loans from defaulters, all further lendings have come to a halt. Bank credit growth was 14 per cent when the Modi government assumed power in 2014. Bank credit growth is now down to 4 per cent and will become zero soon, as per RBI’s own report,” Surjewala remarked.
The party alleged that as a cover-up for non-recovery of loans, the government came up with a proposal for “mega merger of banks”.
Surjewala said that the Modi government dealt a deadly blow to the banking sector through demonetization and its impact continues to haunt the Indian economy even after over three years.
The Congress suggested that the way forward is to restore the RBI autonomy to allow it to go after bank defaulters, restore confidence in banks through a promise of “no witch-hunt” and allowing them to lend prudentially as per their risk norms, and expand credit guarantee program for MSMEs to stimulate credit offtake and propel investment.