Finance Minister Piyush Goyal has started delivering the highly anticipated Union Budget 2019, in which he is expected to announce major reforms in sectors like farming, banking etc.
Piyush Goyal in the very start of the speech, lauded the Modi government’s reforms in the banking sector, that during UPA-era was bagged with ballooning Non-performing Assets issue.
Goyal stated that Rs 3 lakh crore has already been recovered in favour of banks and creditors. He also spoke about recapitalisation of banks to the tunes of Rs 2.6 lakh crores.
The Finance Minister said that the years between 2008 and 2014 witnessed a high credit growth, which also took the NPA level from Rs 18 lakh crore to a whopping Rs 54 lakh crore. He added that till 2014 many lakh crores of NPAs were not even identified properly or were re-written so as to hide them. But, Piyush Goyal said that after Modi government was voted to power, it constructed Asset Quality review to weed out the bad loans. He said that NPAs were a consequence of giving loans to those firms which failed to work properly or showed poor performance.
Piyush Goyal praised the initiative of Insolvency and Bankruptcy code, which has helped the government to curb the NPA menace.
He stated that the IBC has institutionalised a resolution mechanism while preserving the underlying business and jobs.
The Insolvency and Bankruptcy Code (IBC) 2016, is a bankruptcy law in India brought by the Narendra Modi led NDA government seeking to consolidate the existing framework by creating a single Law for Insolvency and Bankruptcy. The Code provides a time-bound process for resolving insolvency in companies and among individuals resulting in much-needed impetus to solving the problem of stressed assets and NPAs in the financial sector of the country.
FM Piyush Goyal also mentioned the lifting of three banks: Bank of India, Bank of Maharashtra and Oriental Bank of Commerce, out of the Prompt Corrective Action Framework. The PCA was initiated against these banks in the wake of high NPAs and high amount of losses. PCA restricted these banks from lending further loans and opening new branches. The lifting of these banks from PCA points towards the positive reforms that lead to the banks’ improvements in the capital position and asset quality.
Piyush Goyal also said that during the previous regime, only poor or middle class used to fear unpaid loans while the rich went scot free. But now, the FM added, that even the rich have started to be wary of the consequences of not repaying their loans.