Banks must focus on providing improved services to their clients and upgrade technology infrastructure to gain competitive advantage, said Venkaiah Naidu, Vice-President of India.

‘Harness power of tech’

They have to harness digital growth to scale up to the level of world-class businesses, said Naidu at Punjab National Bank’s 125 Foundation Day celebrations in New Delhi on Friday.

Time is now ripe for “systemic reforms” in the banking sector, and there has to be checks and balances so that loopholes in the system are not taken advantage of, he added.

Naidu asked banks to maintain strict vigilance during pre- and post-sanctioning of loans and never to compromise on the due diligence process. They must constantly strengthen their internal processes to effectively monitor funds and maintain strict discipline in lending, he said.

Naidu’s remarks are significant as they come at a time when PNB has just come out of the Nirav Modi-perpetrated scam that blew a ₹14,000-crore hole in the bank’s balance sheet. 

While advising banks to up their game on due diligence and loan monitoring, Naidu also acknowledged that there has been societal decay in values, with many having moved away from ethical behaviour.

In many instances, units have turned sick, but the owners are doing well, he said. Naidu also said that banks have to take a relook at the practice of financing big-ticket projects, which have a long gestation period. Banks can make use of data analytics and technology to identify early warning signals of loan defaults and evolve robust mechanism to identify hidden NPAs. They must focus on nurturing internal skills for credit assessment and undertake forensic audits to understand the intent of the borrower, said Naidu. Naidu also came down on the poll-time promises of ‘farm loan waivers’, noting that it was not going to help farmers in the long run. 

“Politicians are taking to populism. Loan waivers are not going to help farmers in the long term. Farm loan waiver will, at best, bring temporary relief, but these are not permanent solutions. Policymakers should think of bringing permanent solutions,” he said.

Efforts must be taken to provide timely, affordable, and cheaper credit to farmers, he said.

Both BJP and Congress have promised much for farmers in their election manifestos. On its part, the Congress has promised to waive farm loans and make farm debt a civil liability. Besides having a separate agriculture budget, the party has also promised ₹72,000 a year to be transferred to the poor in India.

The BJP has, in its manifesto, reiterated its assurance to double farmers’ income by 2022; it also aims to expand the Pradhan Mantri Kisan Samman Nidhi Yojana (direct payment of ₹6,000 per year to farmers owning less than two hectares of land) across the nation. Farmers over 60 years of age, and those who run small-scale shops, will get pension.

srivats.kr@thehindu.co.in

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