“The banking sector is considered to be the backbone of a country's economy. Recently, the Indian banking sector achieved a major milestone by recording its highest ever net profit, crossing the Rs 3 lakh crore mark. This is in stark contrast to the situation before 2014, when the Congress-led UPA government turned the banking sector into a cesspool of bad loans, vested interests, corruption and mismanagement,” Sitharaman added in the post.
“The 'seeds' of the NPA crisis were sown during the Congress-led UPA era through 'phone banking' when loans were given to undeserving entities under pressure from UPA leaders and party functionaries. Under the UPA, lending in banks often depended on influential relationships rather than a sound business model. Banks were forced to neglect proper due diligence and risk assessment before approving these loans. This led to a massive increase in non-performing assets (NPAs) and institutionalised corruption. Banks also suffered huge losses and capital erosion due to higher provisioning. After banks started transparently disclosing their NPAs for loans given before 2014, gross NPAs of PSBs rose to a high of 14.6% in FY 2017-18,” it added.
