Prime Minister Narendra Modi on Monday said the Indian banking system has shown a big improvement in the past decade and is now strong and sustainable amid robust credit growth and a lower amount of bad loans, with the twin-balance sheet problem a thing of the past.

He was speaking at a programme marking 90 years of the Reserve Bank of India (RBI).

“Today we have reached a point where the Indian banking system is being seen as a strong and sustainable banking system of the world as the near moribund banking system of that time is now in profit and showing record credit.”

He said the gross non-performing asset (GNPA) ratio of the banks, which was around 11.25 per cent in 2018, had fallen below 3 per cent by September 2023.

In December 2018, Urjit Patel resigned as the governor of RBI and was followed by the present governor Shaktikanta Das. The Union cabinet extended Das’s tenure by another three years on December 10, 2021.

The PM said the twin-balance sheet problem — where banks are under stress and corporates are overleveraged — no longer exists, with the Centre capitalising PSU banks to the extent of Rs 3.5 lakh crore thereby strengthening their balance sheets and bringing down the amount of loan defaults.

This came even as banks have registered a credit growth of 15 per cent, with the RBI playing a significant role.

Highlighting the importance of creating a balance between inflation control and growth, the Prime Minister expressed confidence the RBI can become a model and play a leadership role in the world.

Priority to growth

He said that as per the “mantra” of the central bank, “The RBI should make fast growth its top-most priority, along with focusing on trust and stability.”

This comment comes just days ahead of the first monetary policy review of the new fiscal year where the monetary policy committee (MPC) of the RBI is again expected to hold the policy repo rate at 6.5 per cent.

According to the Prime Minister, inflation is at a “moderate level”, despite the Covid pandemic and the geo-political challenges. India followed a path where it took care of both financial prudence concerns and also the requirements of the common man during the pandemic, he added.

Flood of work

Modi also asked bureaucrats to be prepared for the “flood of work” that would follow from the very next day he takes oath for the third straight term.

Exuding confidence in forming the new government after the general elections, the Prime Minister said work will start in the right earnest to make India economically more self-reliant.

Speaking on the occasion, RBI governor Shaktikanta Das said the central bank would endeavour to provide a stable and strong financial system over the next decade, which will act as the bedrock for the country’s economic progress.

He observed that over the years, the RBI has emerged as a symbol of stability, resilience and commitment to the welfare of citizens.