India needs 4 -5 more banks like SBI to meet changing requirements of the Indian Economy: Nirmala Sitharaman

FM says Long Term Future of Indian Banking would be driven by digital processes;

Asks IBA to carry out nation-wide digitized mapping of bank branches

Sitharaman commends banks for smooth amalgamation

Union Finance and Corporate Affairs Minister Smt. Nirmala Sitharaman has said that India needs four or five more banks like SBI. She said that we need to scale up banking to meet the changing requirements in light of shifting recent realities of economy and industry. “The way in which the economy is shifting to a different plane altogether, the way in which industry is adapting, so many new challenges keep arising. To address these challenges, we need not just more, but bigger banks.” The Union Minister shared this point of view with the banking community, during her keynote address at the 74^th Annual General Meeting of the Indian Banks’ Association (IBA) in Mumbai.

FM asks IBA to improve access to financial services pan India through scientific digitized mapping

The Finance Minister exhorted the industry to imagine how Indian banking has to be in the immediate and long-term future. “If we look at post-COVID scenario, India's banking contour will have to be very unique to India, where there has been an extremely successful adoption of digitization. While banks in many countries could not reach out to their clients during the pandemic, the level of digitization of Indian banks helped us to transfer money to small, medium and big account holders through DBT and digital mechanisms.”

The Union Minister underlined the importance of seamless and interconnected digital systems in creating a sustainable future for Indian banking industry. “Long-term future of Indian banking is going to be largely driven by digitized processes."

The benefits of digitization notwithstanding, the Finance Minister observed that there are wide disparities as well in access to financial services.  She said there are parts of our country where brick-and-mortar banks are necessary. The FM asked IBA to improve access of banking in every district through a rationalized approach and optimal utilization of digital technologies.

To achieve this, the Union Minister advised IBA to carry out digitized location-wise mapping of all bank branches for every district of the nation. “Almost two-thirds of nearly 7.5 lakh panchayats have optical fibre connection, IBA should consider this and conduct an exercise and decide where banks should have a physical presence and where we are able to serve customers even without physical branch. IBA should take the initiative and complement government's efforts for financial inclusion and enhancing access to financial services, especially in unserved and under-served areas.”

 “Be nimble, agile, adaptive, it is a must for attaining 1 trillion dollar export target for 2030”

The Finance Minister reminded bankers of the need to adapt in line with fast changes in technology. “What we think is latest today will be outdated in a year or so, we have to thus acquire resources to constantly update ourselves.”

Such nimbleness and agility are especially important in India’s being able to achieve the ambitious export targets we have set for ourselves, she said. “We have given ourselves an export target of $ 2 trillion by 2030, $ 1 trillion in merchandise exports and $ 1 trillion in service exports. In an age of rapid change post the pandemic, there are going to be a lot of challenges in how we look at customers. These challenges cannot be addressed unless banks are going to be nimble, with sound understanding of various businesses and sectors. Hence, the banking industry needs specialists to understand the unique business requirements of diverse sectors and the many businesses who are rapidly relocating to India.”

The Finance Minister also  spoke of the benefits of the recently formed Account Aggregator Framework. “If the framework is put to good use, we would not need specialized credit outreach. Govt. together with RBI has been helping with protocols and frameworks, helping banks attain more through the digital systems in the industry.”

The Finance Minister also spoke of the high potential for banking outreach in the eastern region of the country. “The eastern region of this country has more than adequate CASA (Current Account Saving Account), but there are no takers for credit; you need to address this issue and see how you can lend in those regions, in states such as Bihar.”

“Strengthen UPI”

The Finance Minister said that UPI needs to be strengthened. “In the payment world today, Indian UPI has actually made a very big impression. A RuPay card which was not as glamorous as a foreign card is now accepted in so many different parts of the world, symbolic of India's futuristic digital payment intentions.” FinTech understands that UPI is its backbone, you have to give it its flesh and blood, you have to strengthen UPI, the Minister advised bankers.

 “You ensured that bank amalgamation happened without friction”

The Finance Minister appreciated banks for executing amalgamation of banks even during the COVID-19 pandemic, without causing disruption in services to customers. "I commend that you ensured that amalgamation did not inconvenience customers, you ensured that systems of different banks spoke to each other, you have kept yourselves available during the pandemic in serving customers, while also ensuring that banks' amalgamation happened without friction, without aberrations”, the Minister said.

“NARCL is not a bad bank”

Smt. Sitharaman thanked IBA for having come together in establishing the National Asset Reconstruction Company Ltd. and India Debt Resolution Company Ltd. “Working together, NARCL and IDRCL would be able to restructure and sell the NPAs.”

The Minister asserted that NARCL is not a bad bank. “It is a formulation which is intended to clean up banks' assets and dispose of NPAs in a speedy manner. Banks are now able to raise money from the market, hence the burden on govt. to recapitalize banks will be less, this is how we want banks to function – a lot more professional, with a changed mindset.” The Finance Minister said that this is absolutely the right time to become professional. Bank valuations should be razor-sharp, enabling you to raise the right kinds of amount at the right cost, she said.

“Private sector DFIs needed to finance development needs”

The Minister underlined the importance and need for Development Finance Institutions, even in the private sector. ”Govt. is coming up with a Development Finance Institution, at the same time, we have made enough provisions for DFIs to come up in the private sector as well. We hope there is going to be good competition between public and private sector DFIs, so that money is available at competitive prices.”

The FM recalled that the Prime Minister has said that there needs to be a change and reset in our mindset and ways of living and hoped that IBA lives up to this invocation. “We are at a very critical stage of the Indian economy, you are the backbone for it, I wish IBA rises to this occasion and provides India the best of financial services.”

The Minister called for a reimagination and sprucing up of banks’ corporate communications, in line with changing realities of the new digital and connected age.  Smt. Sitharaman, at the beginning of her address, paid homage to all members of the banking industry who lost their lives serving the nation through the COVID-19 pandemic.

MoS Bhagwat Karad commends banks for taking benefits of financial packages to people

Minister of State for Finance Dr. Bhagwat Kishanrao Karad commended banks for taking to the public the benefits of various financial stimulus packages including Aatma Nirbhar Bharat package, announced by the government in view of COVID-19 pandemic. The Minister said that all banks have to take special efforts in implementing EASE 3.0 and 4.0 Reforms and modernize banks.  He also underlined the role of JAM Trinity, which is playing an important role in Direct Benefits Transfer, in taking govt. benefits directly to the people.

Earlier, Chairman of Indian Banks’ Association (IBA) Shri Rajkiran Rai G. welcomed the gathering, while Chief Executive, IBA, Shri Sunil Mehta gave a presentation on the 75-year journey of the Association. A detailed snapshot of this journey can be found in this IBA document here.

Secretary and Managing Committee Members of IBA; Managing Directors, CEOs and Executive Directors of the member banks of the Association too were present at the meeting. The programme can be watched here.