Our Banking System Needs Improvement for MSME Lending: Arun Jaitley

The strength of the banking system has to be improved so that they are able to lend to MSMEs and Non-Banking Financial Companies (NBFCs),  said Arun Jaitley, Union Finance Minister.

He was speaking at the Union Bank of India’s 100th-anniversary celebrations event held in Mumbai.

Banks should be in a position to expand credit so that the liquidity in the markets is maintained, he said.

“The NBFCs today need credit because a large part of lending is done by them,” he said.

Jaitley said the Goods and Services Tax (GST) was a “monumental reform” with a disruptions impact on growth only for two quarters.

There is a need to bring down non-performing assets (NPAs) in the banking system in order to strengthen the banking system and support growth, he said.

“The future of our economy depends on this lending capacity. And therefore we have to target ourselves and our policies, the whole system has to direct itself in a direction, where we improve the credit giving ability of our banks, and where we improve the liquidity available as far as our markets are concerned,” Jaitley said.

In the last four years, the government announced capital infusion of Rs 70,000 crore and Rs 2.12 lakh crore to improve the capital levels of banks, he said.

He said, “To maintain the strength of the banking system and help India grow, we need to minimise our NPAs. Various, multiple options have been exercised, not many yielded results. What is being experimented today is certainly yielding results, slowly but surely.”

“You will always have critics and cynics who will come up and say it (GST) slowed down India’s growth,” Jaitley said.

The government also enacted the bankruptcy law and amended various loan recovery laws to minimise the NPAs. More efforts are required in this direction.