Over the last decade, the Government of India has implemented sweeping reforms in the banking and financial sectors, demonstrating its commitment to financial stability, inclusivity, and economic growth. This article outlines the comprehensive measures undertaken and the resulting transformation of the sector, based on government publications and data.
1. Strengthening Public Sector Banks (PSBs)
Financial Performance
Public Sector Banks (PSBs) have emerged stronger with remarkable financial achievements:
Net Profit: PSBs recorded their highest-ever aggregate net profit of ₹1.41 lakh crore in FY 2023-24 .
Gross NPAs: Gross Non-Performing Assets (GNPAs) declined from a peak of 14.58% in March 2018 to 3.12% by September 2024, marking a significant improvement in asset quality .
EASE Framework
The Enhanced Access and Service Excellence (EASE) reforms, from EASE 1.0 to EASE 7.0, introduced data-driven decision-making, risk management, and customer service improvements. These have significantly enhanced PSBs’ efficiency and resilience.
Bank Consolidation
Through mergers, the government has reduced the number of PSBs, creating larger entities with better risk management and operational efficiency. This has enabled them to function more competitively and efficiently .
2. Tackling NPAs
To resolve non-performing assets (NPAs):
The 4R Strategy (Recognize, Resolve, Recapitalize, and Reform) was employed.
The Insolvency and Bankruptcy Code (IBC) played a crucial role in resolving stressed assets, enabling a recovery of ₹7 lakh crore by FY 2023-24.
3. Financial Inclusion
Pradhan Mantri Jan Dhan Yojana (PMJDY)
Launched in 2014, PMJDY has become the cornerstone of financial inclusion:
Over 54 crore bank accounts opened by November 2024, with total deposits of ₹2.37 lakh crore .
Women own 55.7% of these accounts, highlighting a focus on gender equity.
Direct Benefit Transfers (DBTs)
Using PMJDY accounts, the government has transferred over ₹2.2 lakh crore in welfare benefits directly to beneficiaries, reducing leakages and ensuring timely delivery of subsidies.
4. Supporting Agriculture and MSMEs
Kisan Credit Cards (KCCs)
KCCs have provided timely credit to farmers:
Over 7.72 crore accounts were active by September 2024, with outstanding credit of ₹9.99 lakh crore .
MSME Credit
The government has promoted MSME growth with targeted credit schemes:
MSME advances grew at a CAGR of 15% over three years, with ₹28.04 lakh crore in loans by FY 2023-24.
MUDRA Loans
The Pradhan Mantri MUDRA Yojana has sanctioned over ₹31.28 lakh crore in loans to 50.31 crore beneficiaries since its inception in 2015, fostering micro-entrepreneurship.
5. Digital Transformation in Banking
Unified Payments Interface (UPI)
UPI has revolutionized digital payments:
Transactions surged to ₹223 lakh crore from January to November 2024 .
Over 15 billion monthly transactions highlight its growing acceptance.
Digital Banking Units (DBUs)
The government launched 75 DBUs to promote digital banking access in semi-urban and rural areas, bridging the digital divide.
6. Welfare-Oriented Reforms
Social Security Schemes
The government launched affordable insurance schemes, including:
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY): 21.67 crore enrollments by 2024 .
Pradhan Mantri Suraksha Bima Yojana (PMSBY): 47.59 crore enrollments .
Atal Pension Yojana (APY)
With 7.11 crore subscribers, APY ensures old-age security for informal sector workers.
7. Enhancing Employee Welfare in PSBs
Through revised HR policies, PSB employees have seen:
A 17% increase in salaries under the 12th Bipartite Settlement .
Enhanced benefits for women employees, including childcare and maternity leave provisions.
8. Resilience During Crises
COVID-19 Response
The Emergency Credit Line Guarantee Scheme (ECLGS) provided ₹3.5 lakh crore in loans to sustain MSMEs during the pandemic. Loan moratoriums and restructuring schemes further supported businesses.
9. Globalizing India’s Banking Solutions
UPI International
India’s UPI system is now accepted in countries like France, Nepal, and Mauritius. Partnerships with international banks have extended UPI’s global reach, enhancing India’s digital economy footprint.
The Way Forward
India’s banking reforms have laid a robust foundation for inclusive growth and economic resilience. Future efforts will likely focus on green banking, AI-powered financial services, and strengthening India’s position as a global digital payment leader.
The government’s decade-long commitment to reform and welfare in the banking sector has fortified its role in achieving inclusive economic growth. With technology and inclusivity at its core, India’s financial sector is poised for sustained excellence.
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