Banking Sector Needs to Support the Growth Momentum to Achieve 9% Growth Rate: FM
FM Appreciates New Initiatives Taken by Union Bank of India In the Area of Financial Inclusion
Union Finance Minister, Shri Pranab Mukherjee said that India with growth trajectory heading towards 9% or more in the coming years is placed at a critical juncture. Shri Mukherjee said that 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. Shri Mukherjee was addressing the senior officers and employees of the Union Bank of India and other dignitaries present on the occasion of 92nd Foundation Day of Union Bank of India. On this occasion, Shri Namo Narain Meena, Union Minister of State for Finance, Shri R. Gopalan, Secretary Department of Financial Services, Shri M.V. Nair, Chairman-cum-Managing Director of Union Bank of India and Shri M.V. Kamath, Senior Journalist and Padam Vibhushan Awardee were also present among others. On this Occasion, Union Finance Minister Shri Pranab Mukherjee also released a book entitled “Beacons’ Bank”. This book is a story about Union Bank of India, which is written by Shri M.V. Kamath.
The Finance Minister said though the Indian banks have emerged from the global financial crisis successfully with relatively good health yet challenges still remain. He further said that there was a decline in the profitability in the Indian banks in 2009-10. He said that the asset quality of banks deteriorated and the coverage ratio of provisions showed a fall at the aggregate level reflecting a weakening cushion to meet NPA losses. Therefore, the Minister said that the banks need to give due attention to the asset quality management and prudent provisioning.
As regards financial inclusion, the Finance Minister appreciated the new initiatives taken by Union Bank of India in this field. The Finance Minister specifically mentioned about the financial support to BPL families provided by the bank through its Adarsh Gram Yojana under which it adopted 103 villages for all round development and credit delivery to farmers through Agriculture Credit Societies on a technology driven Banking Correspondent Model Platform.
The Finance Minister, Shri Mukherjee also expressed his pleasure as the Bank achieved 100 per cent core banking in its Regional Rural Banks (the first bank to achieve this requirement in a record time) and released the two million biometric cards under its financial inclusion plan. He also appreciated the Bank’s growth in its business from just Rs. 50,000 crore to Rs.3 lakh crore during this decade and its vision to become among the top three banks in India by 2012.
The Finance Minister asked all the banks to step up their efforts towards financial inclusion using the instrument 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.
Later, Minister of State for Finance Shri Namo Narain Meena and Secretary, Department of Financial Services Shri R. Gopalan also distributed financial benefits to BPL families on this occasion.
Following is the text of the speech delivered by Union Finance Minister, Shri Pranab Mukherjee on the occasion of 92nd Foundation Day of Union Bank of India:
“I am indeed very happy to be here today on the occasion of the 92nd foundation day of Union Bank of India. The importance of this occasion has been further enhanced by the release of the history book of the Bank, capturing an eventful journey spanning 9 decades. I take this opportunity to convey my deep appreciation to the Directors and the employees, present and past, whose vision, leadership and zeal have taken the Bank to its present position and to the customers for their unflinching faith in the bank.
India with growth trajectory heading towards 9 per cent or more in the coming years is placed at a critical juncture. Banking sector needs to support this growth momentum. Though the Indian banks could emerge from the global financial crisis in relatively good health, challenges still remain. There was a decline in the profitability of Indian banks in 2009-10 in terms of all the major indicators. Furthermore, the asset quality of banks deteriorated and the coverage ratio of provisions showed a fall at the aggregate level reflecting a weakening cushion to meet NPA losses. Banking Sector needs to support the growth momentum in the economy while giving due attention to the asset quality and prudent provisioning to balance emerging returns and risks.
As regards financial inclusion India compares poorly with OECD as well as many of the Asian Peer Group Countries. Though there has been a welcome development in the recent years with increase in the penetration of bank branches and ATMs, performance in meeting agricultural and weaker sections sub-targets remains relatively weak. According to the RBI, of the 6 lakh habitations in India only about 30 thousand have commercial bank branches. 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 deposit mobilized in rural bank branches was merely 9% of total deposit mobilized by banks and the share of rural credit in total credit of banks was even lower at 7%. The percentage of people having any kind of life insurance cover is just 10% while the percentage of non-life insurance is merely 0.6%. 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.
I am happy to note that the Union Bank has been transforming itself into a modern bank by leveraging on technology and adapting to the changing needs and opportunities, ensuring appreciable growth in its business from just Rs.50,000 crore to Rs. 3 lac crore during this decade. The Bank has been diversifying its financial services across banking, insurance and asset management and has been rapidly expanding its reach to customers through branch banking and ATMs which has increased from 2400 to 5300 in the last 5 years. It has also made a mark in its global presence across 6 major world commercial centers in the last 2 years through a branch and representative offices. Its rebranding and new logo has brought in youthfulness and appeal to the young India. With this the bank continues to retain its commitment to excel in service to meeting commercial and social banking needs of different sections of the population.
Last November, I had the pleasure of being present when the bank achieved 100% Core Banking in its Regional Rural Banks (the first bank to achieve this requirement in a record time) and released the 2 millionth bio metric card under its financial inclusion plan. The Bank’s Adarsh Gram Yojna adopting 103 villages for all round development and Village Knowledge Center for guidance and counselling to farmers is indeed a commendable initiative. Today we have witnessed two new initiatives, i.e. financial support to BPL families in Adarsh Gram and credit delivery to farmers through agriculture credit societies on a technology driven Banking Correspondent model platform. With this the bank has clearly established its role as an innovative bank in the area of financial inclusion.
I am sure the Union Bank will continue to maintain growth with innovation and emerge as a leading bank in various spheres of financial services, both within the country and outside the country. I am happy to learn that the bank has embarked on the next phase of transformation initiative which focuses on customer service. It also has the vision of becoming among the top 3 banks in India by 2012.
I wish the Bank and its stakeholders best of luck on this important occasion and on the journey ahead.”