NEW DELHI: Finance Minister Arun Jaitley on Tuesday said that he expects India's economy to sustain an annual growth rate of around 8 per cent on the back of measures taken by the government such as a unified tax code and a new bankruptcy law. "The formalisation of the Indian Economy coupled with inclusive growth through massive financial inclusion has unlocked purchasing power which will drive India's growth," Jaitley said.
He said that a growing economy will help banks grow in strength. "Conversely, as lifelines of the economy, banks would need to build their strength to support the lending needs of a growing economy," he added.
Jaitley said that the formalisation of the Indian economy through the Insolvency and Bankruptcy Code (IBC), GST, demonetisation and Digital Payments have enabled better assessment of financial capacity and risks.
"The amendment of IBC to debar wilful defaulters has had the unintended positive consequence of defaulting borrowers stepping forward to make payment in order to participate in the Resolution Process," he said.
But he said India needs to assess the efficiency of its debt recovery tribunals for quicker decisions. He underscored the need to trust and confidence in the banking system as a necessary precondition for meeting the needs of the economy.
He exhorted banks to ensure all steps at their end to ensure clean lending and effective action in cases of fraud and wilful default, to justify the trust reposed in banks. He said that the banks must strive to be seen always as institutions of clean and prudent lending.
The Finance Minister said that with the recent Amendment to the Prevention of Corruption Act, there should be no apprehension in the minds of bankers in supporting investments that are in the best interests of the economy, the nation and the banks.
He also noted the continued relevance of PSBs in the Indian context, in view of their development contributions and to support financial inclusion. He noted that support for Non-retail Banking from other lenders continues to be insufficient.
He said that the perception regarding the health of PSBs has become more positive as banks have posted positive results in terms of resolution, recovery, provisioning and credit growth.
While noting the positive results from the IBC mechanism, he also flagged the need to assess and revisit the efficacy of the Debts Recovery Tribunal (DRT) mechanism, particularly in view of long lead times in disposal of cases. He underscored the requirement for expediting recovery through the DRT mechanism, so that their original objective of speedy recovery proceedings is realised.