'Banks must step up lending to MSMEs as that's where India's growth engine lies'

HOME MINISTERAMIT SHAH SAYS BANKS SHOULD NOT ONLY PLAN FOR GROWTH, BUT TRY TO CHANGE THE SCALE AND BE IN THE TOP 10 GLOBALLY

- Amit Shah, Union minister of home affairs and cooperation, spoke to Shyamal Majumdar and Rishi Raj at the FE Best Banks Awards event in Mumbai last Thursday. Edited excerpts:

I want to tell our banks that they should not only plan for growth, but try to change the scale. Our banks should be in the top ten. If you think small, you will achieve it easily. If the thought is big, you will also become big with it. Second, they must step up lending to MSMEs. If banks don’t value MSMEs, it amounts to stopping their growth which is unfortunate. MSMEs have huge potential. Look at Ambani, Adani, Torrent, etc... all of them started as MSMEs. The government stands guarantee for MSMEs.

Can we expect more reforms in India’s banking sector?

Reforms are a continuous process. But if we want to analyse the banking sector, we have to do it comparatively before and after 2014. During the UPA regime, phone banking was the norm. It did not mean banking through phone but loans being granted due to phone calls. And we had taken it for granted. From 2008 to 2014, ₹52 lakh crore were sanctioned, and you all know what happens when you take too many loans. Due to this, the banks of this country experienced a very big problem of bad loans. There was negligence in keeping records, lack of transparency and corruption.

All three destroyed the banking sector. At that time, we started reforming the banking sector. You will be surprised to know that 600 million people in the country did not have a single bank account in their entire family. The core of this government’s policy is financial inclusion. In 10 years, 530 million people opened their bank accounts. MSMEs had stopped getting loans. Due to provisioning, there was continuous erosion in bank capital, and, in a way, there was a big crisis of nonperforming assets (NPA).

In 1999, during the Congress regime, the gross NPA of the banking sector was at 16%. When the Atal Bihari Vajpayee government left in 2004, the NPA stood at 7.8%. After 10 years of Congress government, the NPA again increased from 7.8% to 19%. Now it is at 2.5%. We had to bring in a lot of changes.