India's banking sector records highest-ever net profit under PM Modi's government: Finance Minister

Finance Minister Nirmala Sitharaman in a long post in X drew a parallel for the banking sectors' performance during the UPA government and the NDA government.

India's banking sector has reached a significant milestone, recording its highest-ever net profit, exceeding ₹3 lakh crores. As per Sitharaman, this achievement marks a dramatic turnaround from the pre-2014 era when the sector struggled with bad loans and mismanagement under the UPA government. Finance Minister Nirmala Sitharaman credits this success to the Modi government's comprehensive reforms and decisive leadership.

The Banking sector is considered the backbone of a nation’s economy. Recently, India’s banking sector achieved a significant milestone by recording its highest-ever net profit, crossing ₹ 3 lakh crores.

This is in stark contrast to the situation before 2014 when @INCIndia-led…

— Nirmala Sitharaman (Modi Ka Parivar) (@nsitharaman) May 31, 2024

UPA era challenges

Sitharaman highlights the challenges inherited from the UPA regime, where loans were often granted based on powerful connections rather than sound business propositions. This practice led to a surge in Non-Performing Assets (NPAs) and created a "Twin Balance Sheet" problem. Under the UPA, NPAs rose significantly, and banks faced substantial losses and capital erosion, hindering credit growth essential for economic development.

The UPA Alliance, dominated by dynastic parties, used banks for their own 'Parivar Kalyan' (family welfare).
In contrast, our government has leveraged banks for 'Jan Kalyan' (public welfare).

Efforts to expand banking in India faltered for decades due to Congress's limited…

— Nirmala Sitharaman (Modi Ka Parivar) (@nsitharaman) May 31, 2024

Comprehensive reforms

The Modi government implemented a strategic 4R’s approach: Recognising NPAs transparently, Resolution and Recovery, Recapitalising PSBs, and Reforms. These measures aimed to address credit discipline, responsible lending, and improved governance. Key reforms included the creation of the Banks Board Bureau (BBB) for transparent selection of bank directors, the Insolvency & Bankruptcy Code (IBC) for faster recoveries, and the Fugitive Economic Offenders Act of 2018 for seizing assets of economic offenders.

The banking sector turned around due to PM Shri @narendramodi's strong and decisive leadership.

Our government atoned for the UPA's sins in the banking sector through comprehensive and long-term reforms.

The 2015 'Gyan Sangam' meeting with public-sector banks, led by the…

— Nirmala Sitharaman (Modi Ka Parivar) (@nsitharaman) May 31, 2024

Significant improvements

As per the Finance Minister, due to these reforms, the financial health of Public Sector Banks (PSBs) has improved markedly. In FY 2023-24, PSBs recorded a net profit of ₹1.41 lakh crores, almost four times higher than in FY 2014. Net NPAs declined to 0.76% from a peak of 7.97% in 2018, and gross NPA ratios also dropped significantly. Credit growth reached a decade-high of 16% in FY24, indicating a robust banking sector.

The 'Samudra Manthan' of sorts in the banking sector under PM Modi's leadership yielded positive results along with expected challenges during the 'churn’.

Due to our government’s policy response to recognition of stress, resolution of stressed accounts, recapitalisation and…

— Nirmala Sitharaman (Modi Ka Parivar) (@nsitharaman) May 31, 2024

Enhanced financial inclusion

Finance Minister Nirmala Sitharaman also pointed out that the Modi government has prioritized financial inclusion through schemes like Jan Dhan and MUDRA, which have expanded banking access to millions. Over 52 crore Jan Dhan accounts have been opened, with significant deposits and a large percentage belonging to women and rural residents.

Commitment to future growth

In conclusion, Sitharaman emphasized the government's ongoing commitment to strengthening the banking sector, ensuring it supports India's path to becoming a developed nation by 2047. The reforms have transformed banks into pillars of public welfare, driving financial inclusion and economic growth.

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