Prime Minister Narendra Modi on Wednesday held a meeting with the stakeholders of banks and NBFCs and discussed issues in the financial sector, including credit growth and risk aversion.

The meeting largely talked about the vision and roadmap for the future.

A statement from the Prime Minister's Office (PMO) said that the crucial role of the financial and banking system of supporting growth was discussed. It was noted that the small entrepreneurs, SHGs and farmers should be motivated to use institutional credit to meet their credit needs and grow.

"Each bank needs to introspect and take a relook at its practices to ensure stable credit growth. Banks should not treat all proposals with the same yardstick and need to distinguish and identify bankable proposals and to ensure that they get access to funding on their merit and don't suffer in the name of past NPAs," it said.

Risk aversion by banks has been a major concern of late as credit and liquidity are the need of the hour amid the Covid-19 pandemic.

The Reserve Bank of India's latest Financial Stability Report said that heightened risk aversion has pulled the overall credit growth rate of scheduled commercial banks to 5.9 per cent on a year-on-year (y-o-y) in March 2020.

"Bank credit, which had considerably weakened during the first half of 2019-20, slid down further in the subsequent period with the moderation becoming broad-based across bank groups," the report said.

During the discussion on Wednesday, the Prime Minister noted that the government is firmly behind the banking system and is ready to take any steps necessary to support it and promote its growth.

"Banks should adopt fintech like centralised data platforms, digital documentation and collaborative use of information to move towards digital acquisition of customers. This will help increase credit penetration, increase ease for customers, lower costs for banks and also reduce frauds," the statement said.

It was stressed that India has built a robust, low cost infrastructure which enables every Indian to undertake digital transactions of any size with great ease and banks and financial institutions should actively promote the use of RUPAY and UPI among its customers.

Further, the Prime Minister also reviewed the progress of schemes like emergency credit line for MSME, additional KCC cards, liquidity window for NBFC and MFI.

"While it was noted that significant progress has been made in most schemes, banks need to be proactive and actively engage with the intended beneficiaries to ensure that the credit support reaches them in a timely manner during this period of crisis," the statement said.