Innovations for a proactive flow of bank credit



Speaking on “Create synergies for a homogeneous flow of credit and economic growth”, during the closing session of a conference on ‘Build Synergy for Seamless Credit Flow and Economic Growth, ”said the Prime Minister adamant that banks should shift from the role of ‘loan approvers’ to a ‘proactive partnership with loan seekers’ to develop a base of wealth-creating entrepreneurs who can potentially add employment opportunities and help build a autonomous country.

It should be noted that due to the continued focus on banking reforms, policy support and timely regulatory interventions, banks may withstand the COVID-19 shock better than expected. In line with early trends, banks’ gross non-performing asset (GNPA) and capital adequacy (CAR) ratios improved further in September 2021 from their June 2021 levels. prudence in raising capital. The profitability indicators of several banks are also at their highest for several years. The improved parameters partly reflect the regulatory relief given to banks during COVID-19 as well as the fiscal guarantees and financial support provided by the government.

The push on financial inclusion (FI), the consolidation and injection of capital into public sector banks (PSB), the creation of the National Asset Reconstruction Company Ltd (NARCL) – a bad bank designed to quickly solve problems bad debts were steps in the right direction. In its first phase, bad debts up to 2 trillion rupees will be resolved. Debt resolution has been further accelerated by improving the legal ecosystem by appropriately amending the Insolvency and Bankruptcy Code – 2016, strengthening Debt Collection Courts (DRT) and legal reforms. Diplomatic channels were used to collect money from defaulting debtors who fled the country. In summary, these measures have made it possible to recover bad debts to the tune of 5,000 billion rupees. The loan recovery process has been strengthened by strengthened political efforts in a number of ways and will continue.

  • Banking reforms are working well:

Thus, many weaknesses of the banks have been corrected through continued reforms and policy interventions. Banking reforms are a lifelong journey that is set to continue. It is now up to banks to reorient their internal processes and risk management systems to maintain improved performance and institutionalize best governance practices so that they can play a more proactive and constructive role in accelerating credit flows. RBI has now focused more on the bank’s business model to ensure their sustainability. Based on improving fundamentals, banks are now in a better position to raise capital in the markets and use it to improve their lending capacity. The connectivity of banks with the basic economy has also improved with a widespread increase in the number of Pradhan Mantri Jan Dhan Yozana (PMJDY) account holders combining the three forces – Jan Dhan, Adhaar and Mobile (JAM) trinity.

A formidable FI force is created on 10/11/2021 with PMJDY savings deposit accounts of 43.85 crore, debit cards of 31.72 crore and a deposit base of 1.48 trillion rupees, a phenomenal success. These FI efforts are hailed globally as an effective way to bring about socio-economic transformation. Some of the studies have also shown that geographic areas with a high density of PMJDY accounts are prone to low crime rates reflecting the multidimensional role of FI and its domino impact.

Banks have digital power. Fintechs and other non-banking institutions are joining the discovery of the power of technology to serve people. As entrepreneurs are well integrated with GST and income tax portals, reliable operational data is available. Banks can understand well the type of business and the turnover of entrepreneurs. The need is to unleash the power of technology by proactively approaching potential borrowers with the bank’s offers encouraging dynamic business entities to grow their businesses instead of waiting for borrowers to queue for loans.

Whenever the government carries out development projects in different geographies, banks must take action to personalize financial solutions. Banks should strive to educate their customers to go fully digital so that their profiles can be captured digitally and further assistance can be provided. Each bank branch should aim to convert its minimum 100 customers to go digital. Even roadside vendors are helped by banks through the PM SVANidhi program. This will herald the very capture of their microdata for future use by banks. Digital history is a good tool for banks to plan loan interventions.

Having gained good strength despite the shocks induced by Covid19, it is time for banks to step forward to help unlock the potential productive capacity of entrepreneurs with greater involvement and proactive support. Using enough cash and digital power at their disposal, banks should work with fintechs in partnership with borrowers to grow businesses. A holistic and innovative approach takes time instead of a reactive approach to only think about financing when the borrower approaches.

An online monitoring tool for funding projects from different ministries will be institutionalized, possibly as part of Gati Shakti’s national master plan. It will provide a lot of data input to support the action. Banks should unleash development potential by directly engaging women’s self-help groups up to large corporations so that the economy does not suffer from lack of bank financing.

Now is the most appropriate time for banks to take the leap to a higher growth trajectory using digital power. The government is committed to supporting good faith credit decisions taken proactively in pursuit of the goal of Átmanirbhar Bharat Abhiyaan ‘. The Bank’s contribution to economic growth will be essential as we aspire to work towards the achievement of the goals, more importantly during the dear Ázadi Ka Amrit Mahotsav ‘- the achievement of the collective aspirations of the nation. The role of the bank is expected to go far beyond mere financial service providers to become proactive architects of creating a glorious future for generations to come by directly nurturing micro and mega entrepreneurs. .



The opinions expressed above are those of the author.




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