Finance Minister Arun Jaitley on Saturday said the banking system lent excessively and functioned in a non-transparent manner with the real picture “hidden below the carpet” till two years ago. “Our banks had lent excessively. While we were lending excessively, we were through various restructuring processes… I was reading those notes… till 2015 nobody knew what the real picture was. The real picture was hidden below the carpet,” Jaitley said at the ET Awards function. “No economy can really survive if the main source of finance was in such non-transparent position,” he said.
Referring to the huge stressed assets including bad loans of over Rs 9.50 lakh crore, the finance minister said, “this had to be addressed not by any kind of small induction or some band-aid solutions. You needed to have much larger impact as far as the banking structure was concerned and there could be a real impact. Therefore we announced programme for recapitalisation itself.”
Without mentioning demonetisation and GST, Jaitley said, “the whole idea of making the economy is a much cleaner economy. India aspires to be a developed economy… aspires fastest growing amongst the fastest economies in the world. You can’t have an economy where the size of the shadow economy is much bigger than the apparent economy.”
“Therefore a series of steps had been taken in order to discipline and give opportunities to people to come clean,” he said. Demonetisation of Rs 500 and Rs 1000 notes was announced on November 7, 2016.
According to him, on the individual size, the tax base is substantially expanding. The number of digital transactions is expanding. Conceding that there will be some “noise and grievances” because of the implementation of tax reforms like GST, he said paying taxes is essential.
“Paying taxes is always a fundamental duty of every citizen. It’s a patriotic duty to be a part of that structure, rather than outside the structure. It is only then that the implementation will really show its larger, longer-term impacts,” he said.
On direct taxes side, he said government has reduced them in such a way where the lowest tax slab is 5 per cent, while on the indirect tax side, it is as low as 1 per cent.
He said the process of structural reforms has a long way to go and added that government has grabbed a lot of low hanging fruits, like increasing FDI caps in multiple sectors. Terming the introduction of the Insolvency and Bankruptcy Code as a “belated reform” he expected the measure to bear fruits going forward. Claiming that government is “extremely transparent” when it comes to banking matters, he said he wants a system which shows the true health of the system.