Asserting that politicians need to think beyond populism, Vice President M Venkaiah Naidu Friday said free power and loan waiver schemes are not long-term solutions to farmers' woes. The statement assumes significance as political parties are making big promises to woo voters in the ongoing general elections. "Free power... People want assured power, they want regular power and then loan waiver scheme. They (schemes) are not going to help the farmers in the long-term because this is not the end of the story," he said at the 125th foundation day celebrations of the Punjab National Bank (PNB).

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"We have to see that we supplement the infrastructure, we provide opportunities of better market... Timely, affordable and cheaper credit (should be made) available to the farmer. These are the long-term solutions. Policy makers of the country have to think on these lines," he said. Main opposition party Congress has promised minimum income guarantee scheme or Nyay to 20 per cent poorest of the country. The scheme is aimed at providing Rs 72,000 a year to the targeted family. On the other hand, the ruling BJP in its poll manifesto has said it will extend Rs 6,000 per year PM KISAN scheme to all farmers. Currently, it is limited to farmers having farm holding of 5 acres. Another political party DMK has promised loan waiver scheme for farmers. 

On rising non-performing assets (NPAs) in the banking system, he said, it is a great concern as the problem has certainly affected banks' capacity to lend. Calling banks to maintain strict vigilance during pre-and post-sanction procedures of loans and never make compromises in the due diligence processes, the vice president said lenders must constantly strengthen their internal processes to effectively monitor funds and maintain discipline in lending. In the last few years, gross NPAs of banks as a percentage of total loans have increased from nearly 2 per cent of total loans in 2008 to nearly 10 per cent in 2017.

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"The accumulation of bad loans happened over a long period of time and now it threatens to hamper economic growth by weakening the credit supply channel of the economy. Some of the factors leading to the increased occurrence of NPAs are external, such as decreases in global commodity prices leading to slower exports. Some are more intrinsic to the Indian banking sector," he said. Time has come for a systemic reform of the Indian banking sector, Naidu said. "There has to be an effective and efficient system of checks and balances in place so that the loopholes in the system are not taken advantage of. We must also take a re-look at the practice of financing big-ticket projects which have long gestation periods and hence face cash flow issues, through deposit-taking commercial banks," he said.

Banks can make use of technology and data analytics to identify the early warning signals of loan defaulting and evolve robust mechanisms to identify the hidden NPAs, he said, adding that they must focus on nurturing internal skills for credit assessment and undertake forensic audits to understand the intent of the borrower.

Expressing concerns over increasing cases of wilful defaults and frauds, Naidu said efforts are being made to bring these individuals and entities to speedy and exemplary justice. He opined that India must enter into more treaties for exchange of information and intelligence on financial fraud and bank accounts and work with international agencies in bringing defaulters to justice. He also said that there is a need to enter into many more strong extradition treaties. The vice president also asked banks to adhere strictly to the principles of business ethics and good corporate governance at all times. Observing that a bankers' role was one of stewardship based on trust, he cautioned that banks have a duty to lend customers' money responsibly.

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Ethical considerations should form an important part of risk-taking activities, he said, adding that the welfare of customers and other stakeholders in good times and bad should be a major concern in any business proposition. Speaking on the occasion, PNB MD Sunil Mehta said the history of the bank has always been strongly intertwined with the history of modern India. "Throughout the years, Punjab National Bank has weathered various challenges it has faced including the two world wars, the partition and economic downturns. Today, it serves over 110 million customers across the world with more than 7,000 branches and employs around 70,000 people," Mehta said.

PNB has topped the first ever EASE (Enhanced Access and Service Excellence) index this year, he said. Talking about bank's resurgence after a lean patch Mehta said, "Last year was a challenging year for us. Putting the past behind, all toiled hard to ensure that the bank returned to profitability in just 9 months." The bank increased its business by one lakh to cross Rs 11 lakh crore at the end of March 2019.