Updated: January 4, 2015 11:27:52 am
Prime Minister Narendra Modi on Saturday promised state-owned banks that his government would free them from political interference in their functioning, and said that they need to be run professionally and be accountable.
Modi, who addressed the chiefs of over two dozen state-owned banks, RBI officials led by Governor Raghuram Rajan, heads of financial institutions and experts at the end of a two-day retreat Govt promises more freedom for PSU banks aimed at finalising a set of banking reforms, said that he was opposed to political interference in the running of banks. The government had no vested interest and public sector banks could derive strength from this fact, he said. However, he added, “Political intervention will enable the voice of the common man to reach such institutions.”
Modi told bankers during the closed-door session on Saturday that they would not receive any calls from the Prime Minister’s Office on business, Hasmukh Adhia, secretary, department of financial services, said quoting the PM.
Modi also asked banks to put an end to lazy banking — the practice of investing only in safe instruments such as bonds and gilts instead of lending. Loan growth in recent times has been at a low, with state-owned banks treading carefully given the huge pile of bad loans and with mixed signals on a possible economic rebound.
The retreat, called Gyan Sangam, at the National Institute of Bank Management was organised by the Finance Ministry in the backdrop of a huge rise in bad loans, especially of public sector banks, lower profitability and growing criticism of their governance practices.
Finance Minister Arun Jaitley, too, echoed similar views at the retreat, with a promise of greater autonomy for state-owned banks. He said that the government was open to taking bold decisions for professionalising PSU banks. The BJP, in its 2014 poll manifesto, had promised major banking sector reforms.
Modi said the banking retreat was the first step towards finding solutions to problems. Adhia said Modi spoke about how important it was to worship both Lakshmi and Saraswati, and that the Gyan Sangam was the confluence of both.
He said Indian banks should work towards emerging as one of the top ten global lenders, citing the example of economies such as Germany and Japan.
He also suggested banks develop dedicated teams to fight cyber crime and improve financial literacy.
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