Expressing concern over the fall in profits of the country's banks in 2009-10, the Union Finance Minister, Mr Pranab Mukherjee asked them to improve asset quality in order to be able to support India's nine per cent growth in the coming years.
“The asset quality of banks has deteriorated and the coverage ratio of provisions showed a fall at the aggregate level reflecting a weakening cushion to meet NPA (non-performing assets) losses,” Mr Mukherjee said.
“India with growth trajectory heading towards nine per cent or more in the coming years is placed at a critical juncture.
“Banking sector needs to support this growth momentum in the economy while giving due attention to the asset quality and prudent provisioning to balance emerging returns and risks,” he said after releasing The Bankers' Beacon, a book on Union Bank's history written by journalist Mr M.V. Kamath.
Though the Indian banks have emerged from the global financial crisis in relatively good health, challenges still remain, the Minister cautioned.
He said India compares poorly with OECD as well as many of the Asian peer group countries on financial inclusion.
Though in the recent years there has been an with increase in the penetration of bank branches and ATMs in the country, performance in meeting agricultural and weaker sections sub-targets remains relatively weak, he pointed out.
According to the RBI, of the six lakh habitations in India only about 30,000 have commercial bank branches, Mr Mukherjee added.
“On an average there are less than three bank branches per 100 sq km of land area and this ratio is worse for rural areas and for the North-eastern region. In 2009, deposits mobilised in rural bank branches were merely nine per cent of total deposit mobilised by banks and the share of rural credit in total credit of banks was even lower at seven cent,” he said.
“The percentage of people having any kind of life insurance cover is just 10 per cent while the percentage of non-life insurance is merely 0.6 per cent,” he said.
He added that, “banks, therefore, need to step up efforts towards financial inclusion using the instrument of scale neutral technology as this would help in bringing the vast population into the ambit of formal finance and also boost future economic growth coupled with equity.”
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