The central government said the decade of strategic measures including bank recapitalization laid the foundation for the next phase of credit and investment growth.
“With stronger balance sheets in the non-financial corporate and banking sectors, investment and credit growth is poised to pick up in this decade, as already evident in the data of the last three years,” a recent report titled “The Indian Economy”. : Review,’ published by the Department of Economic Affairs (DEA) in the Ministry of Finance said.
It said the government helped banks strengthen their balance sheets by recapitalizing them and restructuring the industry.
Bank credit, in recent years, has shown phenomenal growth, outstripping the growth of deposits on the back of sustained demand impetus and robust economic recovery following the Covid-19 pandemic, the report said, adding that the growth of non-food banking credit at 15 percent in FY23 was the highest in the last ten years.
“This would not have been possible without a significant improvement in the health of the banking sector. Even as credit growth picked up, asset quality across all SCB groups continued to improve, with GNPAs (gross non-performing assets) and Net NPAs relative to total advances declining . to a multi-year low in September 2023,” it said.
Other measures
In an exemplary expansion of public services, the PMJDY accounts have grown threefold from 14.7 crore in March 2015 to 51.5 crore as of January 10, 2024, bringing a significant proportion of India’s population into the formal banking system. This was accompanied by an increase in the average deposit per account. DBT regime has so far (December 2023) transferred over Rs 33.6 lakh crore. The DBT led to the removal of duplicate/false beneficiaries and the plugging of leakages. As a result, an actual saving of Rs 2.7 lakh crore (as on March 2022) has accrued to the government.
The enactment of IBC and the amendment to the Banking Regulation Act of 1949 really marked a watershed in the development of the government for the resolution of financial stress in India, enabling creditors to deal with troubled financial assets in a transparent and time-bound manner, it. said
In addition, the government’s budgetary support made the banks well capitalized to absorb losses even during times of adverse stress. The financial strength of the banking sector is expected to further increase with the merger of public sector banks, the report said, adding that the government and the RBI have ensured that the “twin balance sheet problem” of corporates and banks has been converted to “twin balance sheet”. . leaf advantage”.
NBFC growth
Alongside the high growth in bank credit, the credit expansion of NBFCs was also strong, in fact, stronger than the growth in bank credit, driven by a marked improvement in their asset quality, capital levels and liquidity, it said. “A series of measures have been implemented, and they have played an important role in strengthening the NBFCs. “To mention a few, considering the growing size, complexity and interconnectedness of NBFCs, a revised scale-based regulatory framework has been implemented to harmonize the regulations of NBFCs with those of banks, wherever appropriate. The formal PCA framework has been extended to NBFCs to enable supervisory intervention at appropriate times and require the supervised entity to initiate and implement corrective measures in a timely manner to restore its financial health,” the report adds.