PM Modi asks banks not to reject loans due to past NPAs, consider new requests on merit

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Updated: Jul 29, 2020 11:12 PM

PM Modi asked the banks to not treat all credit proposals with the same yardstick and ensure that the borrowers get access to funding on their merit and do not suffer in the name of past NPAs.

narendra modi, prime minister, banks, NBFCThe gross NPA ratio of all SCBs may increase from 8.5 per cent in March 2020 to 12.5 per cent by March 2021

Prime Minister Narendra Modi today interacted with the representatives of banks and NBFCs, where he asked the banks to not treat all credit proposals with the same yardstick and ensure that the borrowers get access to funding on their merit and do not suffer in the name of past NPAs. Narendra Modi also urged banks to motivate small entrepreneurs, self-help groups, and farmers to use institutional credit to meet their credit needs and grow, according to the Prime Minister’s Office. In the discussion held today evening, the Prime Minister highlighted the crucial role of the financial and banking system in fostering growth.

Further in the discussion, PM Modi said that each bank needs to introspect and relook at its practices to ensure stable credit growth. Reassuring the government’s support, he added that the government is firmly behind the banking system. The government also encouraged banks to adopt financial technology such as centralised data platforms, digital documentation, and collaborative use of information to move towards digital acquisition of customers. The centre said that the move will help increase credit penetration, increase ease for customers, lower costs for banks, and also reduce frauds.

Also Read: SEBI extends deadline for filing April-June corporate financial results to September 15

While the Indian banking sector is undergoing financial stress, it also carries baton to induce liquidity into the businesses. However, the woes of India’s commercial banks don’t seem to fade away anytime soon as NPAs are showing the rising trend. The Reserve Bank of India has projected that NPAs may shoot up in the coming months.

In July’s Finacial Stability Report, it showed that the gross NPA ratio of all SCBs may increase from 8.5 per cent in March 2020 to 12.5 per cent by March 2021 under the baseline scenario. It added that the swoes may deepen further in case the macroeconomic environment worsens as the ratio may escalate to 14.7 per cent under the very severely stressed scenario. Given the circumstances, the RBI Governor Shaktikanta Das has advised the banks to remain extremely watchful and focused.

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