Context : The Banking Regulation Bill and financial reforms have led to record-low NPAs, high PSB profits, and expanded financial inclusion.
Relevance : GS 2(Governance) ,GS 3(Economy )
Banking Regulation Bill: Key Amendments
- Scope: Amends provisions across five banking-related Acts, impacting 19 sections.
- Objectives:
- Strengthens governance in the banking sector.
- Standardizes reporting to the RBI.
- Enhances depositor and investor protection.
- Improves audit quality in public sector banks.
- Simplifies nomination procedures, allowing up to four nominees per account.
- Extends the tenure of directors in cooperative banks.
Non-Performing Assets (NPAs) at Multi-Year Low
- Current Status: Gross NPAs of scheduled commercial banks fell to 2.5% (Sept 2024)—a significant decline over the years.
- Contributing Factors:
- Strengthened governance and risk assessment frameworks.
- Better loan monitoring and recovery mechanisms.
- Implementation of Insolvency and Bankruptcy Code (IBC) reforms.
- Stringent action against willful defaulters.
Record Profitability of Public Sector Banks (PSBs)
- Financial Performance:
- Public sector banks (PSBs) posted ₹1.41 lakh crore in net profits in the previous fiscal year.
- Reflects improved efficiency, asset quality, and loan recovery strategies.
Government Stance on Wilful Defaulters
- Opposition Criticism: Allegations that the government allowed defaulters to flee abroad.
- Government Response: Commitment to strict action, aided by measures like:
- Strengthened Fugitive Economic Offenders Act.
- Coordination with foreign governments for extradition and asset recovery.
- Increasing accountability in loan disbursement processes.
Debt Waivers and Alternative Support for Farmers
- No Blanket Debt Waivers:
- Government opposes large-scale debt waivers, citing fiscal discipline.
- Instead, direct cash transfers through PM Kisan Samman Nidhi provide targeted assistance.
Financial Inclusion and Banking Expansion
- Support for Small Entrepreneurs & Vendors:
- PM SVANidhi: Helped 68 lakh street vendors with micro-loans.
- PM Mudra Yojana: Over 50 crore loans sanctioned, promoting self-employment.
- Banking Infrastructure Growth:
- 98% of villages (6.01 lakh villages) now have a bank or post office with banking services.
- Employment in PSBs: 3.9 lakh posts filled over the last decade, strengthening manpower.
Conclusion
- The banking sector has witnessed major improvements in governance, financial health, and inclusion under recent reforms.
- Challenges remain in handling stressed assets, wilful defaults, and ensuring equitable credit access.
- Future focus should be on further strengthening regulatory oversight, digital banking expansion, and reducing informal credit dependency in rural areas.
