FM gives banks till March 31 to ensure all accounts are Aadhaar-seeded

Finance minister Nirmala Sitharaman asked banks on Tuesday to ensure all accounts are Aadhaar-seeded and linked with Permanent Account Number (PAN) by March 31, 2021. She also asked banks to promote digital transactions.

“I would think ideally by December, if not by 31st March, 2021, every account should have a PAN where needed and applicable and Aadhaar in every case,” Sitharaman said, addressing the virtual annual general meeting (AGM) of the Indian Banks’ Association.

The minister also asked banks to ensure they are using the latest technology applications to close loopholes in the banking system and to promote unified payments interface-based (UPI) digital transactions and Rupay cards to make the National Payments Corporation of India (NPCI) a global brand.

Sitharaman stressed on the need for having Aadhaar-seeded bank accounts to ensure there is no duplication or fake beneficiary of government welfare schemes administered through direct benefit transfer.

She asked banks to exploit applications such as data mining and artificial intelligence to combat issues like double encashing of securities that are being used as collateral in multiple bank branches.

“Such kind of loopholes, which exist because your technology applications are not strong enough, I would want banks to ensure that you are now fool-proof on exploiting technology,” Sitharaman said.
Apart from ensuring UPI becomes a common parlance in all banks, Sitharaman said, “I wouldn’t think it is necessary today in India, when Rupay is becoming global, for Indians to be given any other card first than the Rupay itself.” The NPCI should be a priority, she said.

Amalgamation

Speaking about the bank mergers that were effected on April 1, Sitharaman said the process should be used to grow to scales where the changing demands of the industry and economy can be met.

“It (amalgamation) should now become an organic mechanism to grow and to grow to such scales that the new demands, from industry, from the economy, from businesses, can all be met in a changing world,” she said.

The finance minister said the country needed bigger banks but at the same time there was a need for small banks and non-banking financial companies to serve rural areas. “I don’t see a contradiction when I say I want large banks, large enough to meet the needs of a growing and aspiring India, and at the same time, smaller banks, banks on the tap so that they can reach out to far flung areas, rural areas,” she said.

Mudra and SVANidhi schemes

Banks need to focus on micro finance schemes like the Pradhan Mantri MUDRA Yojana for loans up to Rs 10 lakh and the Pradhan Mantri SVANidhi Yojana aimed at financing street vendors, said the minister of state for finance Anurag Thakur.

“People complain that they are not getting loans under the Mudra and SVANidhi schemes. Can you put a chart outside the bank branch or inside showing how much loans have been given under the schemes?” Thakur said while addressing the AGM.

He also brought up representations the ministry received from infrastructure firms stating banks were asking for high margins of 10-15% for financing infrastructure projects and asked banks to revisit these figures.

Focus on recovery

Debasish Panda, secretary of the department of financial services, said banks have managed non-performing assets well though the pandemic by way of adequate provisioning but they need to focus on recovery as well.

“Not mere provisioning, but we need to focus on recovery through various mechanisms whether it is the IBC (Insolvency and Bankruptcy Code) route or the SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002) route,” Panda said during the AGM.

The secretary also asked banks not to shy away from risks. “Don’t shy away from taking risks but do prudent risk management and lend,” he said, adding that technology should be used to the maximum possible extent to minimise the scope of discretion.