Vice President M. Venkaiah Naidu said that the Indian banking sector urgently requires systematic reforms.

Addressing the gathering at the celebration of the 125th Foundation Day of the Punjab National Bank (PNB) recently, the Vice President called for systemic reforms in the Indian banking sector in light of mounting Non Performing Assets (NPAs).

He spoke of the need to have an effective and efficient system of checks and balances in place so that the loop holes in the system are not taken advantage of.

Naidu said that India’s financial institutions have been commended globally for being resilient and for having withstood global downturns and recessions well.

He opined that banks were no longer just about strong lockers and a good interest rate on deposits. ‘They have transcended their conventional mandates and are now at the forefront of India's development story’, he added.

Saying that banks played a central role in India’s quest for financial inclusion and inclusive growth, he expressed his firm belief that India’s banking sector was poised for robust growth as the rapidly growing business and commerce in India would turn to banks for credit and other financial services.

He cited a number of factors such as the upwardly mobile middle class and the digital revolution as the thrust factors behind these growth prospects.

Citing the gains made by India in digital technologies for banking such as India’s Immediate Payment Service (IMPS), RuPay and the Unified Payment Interface (UPI), and the Bharat Interface for Money (BHIM), a mobile app based on UPI, the Vice President asked banks to further harness digital growth to scale up to the level of world-class businesses.

He also spoke about new and innovative business models such as the Payment banks and small finance banks.

The Vice President pointed towards a number of challenges being faced by the banking industry such as the rising Non Performing Assets in the banking system that has the capacity to affect banks’ lending capabilities.

He said that the accumulation of bad loans happened over a long period of time, and now, it threatens to hamper economic growth by weakening the credit supply channel of the economy.