Finance Minister Arun Jaitley on Sunday asked public sector banks to step up lending to the industrial sector as it is their ‘primary responsibility,’ besides ‘partnering infrastructure creation’.
Mr. Jaitley, who was addressing the Union Bank of India’s centenary celebrations over a video link, said public sector banks, like their private sector counterparts, cannot rely only on retail banking.
“As public sector banks, living in a more competitive environment, you have many onerous responsibilities. You cannot, like some of your private sector competitors, rely primarily on retail banking. That would have been an easier course to adopt,” he said.
After remaining subdued for a long time, bank credit is showing signs of picking up since September, with year-on-year loan growth as on October 26 at 14.6% — which is a five-year high.
‘Indiscriminate’ lending
In this context, he also reminded the bankers of the ‘indiscriminate’ lending following the Lehman Brothers collapse — between 2008 and 2014 — which later resulted in the build-up of non-performing assets. “Growth was artificially brought up through excessive lending [during that period],” he said. At present, the main challenge for the public sector banks is to restore the health of these banks and increase lending activity. Talking about various reforms that the present government undertook after assuming office in 2014, Mr. Jaitley termed the introduction of Goods and Service Tax (GST) as a ‘monumental reform’ which ‘impacted growth only for couple of quarters’.
Former Reserve Bank of India Governor Raghuram Rajan , had earlier said in a speech that demonetisation and GST had impacted growth, adding that the current growth rate of 7% was not enough to meet the country’s needs.
“You will always have critics and cynics who will come up and say it [GST] slowed down India’s growth,” Mr. Jaitley said.
The Minister said that after suffering for only two quarters, growth rose to 7.7% and then to 8.2% and pointed out that this was much higher than the 5-6% growth achieved between 2012-14. He said such ‘monumental’ changes, will obviously have some disruption which are transient in nature.
