Union Finance Minister Arun Jaitley on Monday urged bankers to introspect on the challenges of past years and come up with a road map to tackle the problem of non-performing assets (NPA), and strengthen credibility.

Addressing bankers at the 71st Annual General Meeting (AGM) of the Indian Banks' Association, Jaitley said it is important to learn from past challenges for future growth.

“Moderation rather than just running after figures,” was the first lesson Jaitley said bankers must learn. “We ended up creating surplus capacities when we did indiscriminate lending a decade ago… We struggled to find methodologies to effect recoveries,” he added.

He said the system that was created was one which reduced the ability of bankers to find solutions to the rising NPA menace.

“The regime under which we wanted them to function was not a regime of comfort… holding them accountable even for honest decisions,” he said, adding that some commercial judgement must be left to the wisdom of bankers.

Jaitley pointed out that in some cases, bankers may have made honest decision which, with the passage of time, turned out to be erroneous or commercially unsuccessful.

“We landed ourselves in a situation where high debt had been created. We were dressing up the debt and we were not able to resolve it…. One of the factors that led to inability to resolve was the fear of consequences,” Jaitley said, alluding to the pre-liberalisation Prevention of Corruption Act, which was recently amended to redefine ‘criminal misconduct’. Jaitley said these amendments have empowered bankers to take honest decisions for the business based on commercial prudence.

He said the Insolvency and Bankruptcy Code (IBC) had changed the creditor-debtor relationship in India. Section 29A, which bars wilful defaulters from the bidding process, acts as a deterrent against fresh defaults.

“We need to augment our capacities as far as the NCLT and NCLAT are concerned. That is a work in progress and I’m sure over the next few months this will lead to expediting the process,” he added.

On growth, he said, he believes India will remain on a high growth trajectory in the coming years and the banking system will play a pivotal role in it.

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