Finance Minister Nirmala Sitharaman, on Friday, accused the Congress-led UPA government of turning “the banking sector into a cesspool of bad loans, vested interests, corruption and mismanagement” before 2014. The minister said banks were reluctant to provide loans required by small businesses to grow their businesses during the Congress rule.
Analysing the current situation of India’s banking sector, which recently recorded over Rs 3 lakh crore in net profit, in comparison to the pre-2014 scenario, FM Sitharaman in a long thread of posts on X (formerly Twitter) said, “Congress-era reckless and imprudent lending created the disgraceful legacy of the ‘Twin Balance Sheet’ problem, which we inherited in 2014.”
“This problem starved the nation of essential credit flow needed for development. Banks became reluctant to lend to new borrowers, especially MSMEs, the backbone of economic growth and job creation,” the minister said.
Sitharaman said that under the UPA, obtaining loans from banks often depended on powerful connections rather than a solid business proposition. “Banks were forced to neglect proper due diligence and risk assessment before sanctioning these loans. This led to a massive increase in Non-Performing Assets (NPAs) and institutionalised grafts.”
The NPA crisis stifled the credit required to fund the dreams of crores of aspirational Indians who wanted to establish startups and expand small businesses, the minister said.
Importantly, the gross NPAs in MSME loans by scheduled commercial banks had dropped by 14.3 per cent to Rs 1.31 lakh crore for FY23 from Rs 1.54 lakh crore during FY22, Bhanu Pratap Singh Verma, Minister of State in the MSME Ministry had informed the Rajya Sabha in July last year.
GNPAs in MSMEs during FY23 were the lowest in the past five years, peaking at Rs 1.83 lakh crore in FY20 from Rs 1.63 lakh crore in FY19 and declining to Rs 1.82 lakh crore in FY21 before shrinking to Rs 1.31 lakh crore in the previous fiscal, FE Aspire had reported.
Highlighting the reforms in the banking sector on credit discipline, stress resolution and governance undertaken by the BJP government post-2014, Sitharaman underscored the PM MUDRA Yojana offering collateral-free loans up to Rs 10 lakh to MSMEs.
“PM Modi assured that loans will not be denied due to lack of collateral, as he stands as a guarantor for these loans.”
The minister noted that Rs 28 lakh crore loans have been disbursed to over 48 crore people under the scheme, with 68 per cent of loans granted to women and NPAs below 3 per cent.
Likewise, under the Stand-Up India scheme focusing on making SC/ST individuals and women become self-reliant, Rs 27,806 crore loans were disbursed to over 2.28 lakh beneficiaries. Under PM SVANidhi scheme for street vendors, over Rs 11,400 crore loans were disbursed to 78 lakh street vendors, the minister said sharing the information.