Daijiworld Media Network - Amaravati
Amaravati, Jul 17: Union Finance Minister Nirmala Sitharaman on Friday accused the previous UPA government of encouraging a "phone banking" culture that, she said, led to a sharp rise in non-performing assets (NPAs) and weakened the country's banking sector.
Addressing a credit outreach programme in Narasaraopet, Andhra Pradesh, Sitharaman alleged that between 2004 and 2014, banks were pressured to sanction loans based on directions from political leaders rather than on borrowers' eligibility.
She claimed that influential leaders would contact banks from New Delhi and ask them to extend loans to selected individuals who were otherwise ineligible. According to her, many of these loans remained unpaid, resulting in mounting NPAs and financial stress for banks.
The Finance Minister said the banking system underwent a significant transformation after Prime Minister Narendra Modi assumed office in 2014. She stated that the government's focus shifted towards ensuring banks proactively reached citizens with financial services instead of responding to political influence.
Highlighting various welfare initiatives, Sitharaman said banks are now extending collateral-free loans to eligible beneficiaries across villages under government-backed schemes. She pointed to programmes for street vendors, women and small traders, where the government provides credit guarantees to enable easier access to low-interest loans.
She said the initiative was introduced to reduce the dependence of small businesses on private moneylenders and middlemen, who often charge exorbitant interest rates.
"The objective of the NDA government is to provide loans purely on the basis of eligibility. Public sector banks have changed their approach, and people's confidence in the banking system has grown," she said, describing the Narasaraopet credit outreach programme as an example of this change.
During the event, Sitharaman and Andhra Pradesh Chief Minister N. Chandrababu Naidu distributed loans worth Rs 3,216 crore to 1,03,246 beneficiaries under various Central government schemes. The package included Rs 2,363 crore for agriculture, Rs 325 crore for micro, small and medium enterprises (MSMEs), and Rs 624 crore for housing, education, vehicle and solar energy projects.
The two leaders also flagged off ambulances donated by Union Bank under its Corporate Social Responsibility (CSR) initiative and distributed bicycles to girl students.
Chief Minister Chandrababu Naidu said the credit outreach programme would benefit self-help groups, entrepreneurs, traders, farmers and street vendors by improving access to institutional finance.
He said bank credit provides the foundation for agricultural growth, entrepreneurship, women's empowerment and youth employment while helping people avoid borrowing from private lenders at high interest rates.
Naidu also praised Sitharaman for her role in addressing the NPA issue and promoting digital banking reforms.
The Chief Minister further said the Central government had extended significant financial support to Andhra Pradesh for projects such as Amaravati, the Polavaram irrigation project and the Visakhapatnam Steel Plant. He added that the state would receive Rs 7,707 crore under the VB-G Ram G scheme and that the Centre had committed Rs 40,000 crore to develop Rayalaseema as a horticulture hub.
Naidu also said the state government had restructured high-interest borrowings inherited from the previous administration with the Centre's support, resulting in savings of Rs 1,538 crore.
State Finance Minister Payyavula Keshav, Energy Minister Gottipati Ravikumar, MP Lavu Sri Krishnadevarayalu and representatives from several banks were present at the programme.