Address by Shri M. Venkaiah Naidu, Honourable Vice President at the 125th Foundation Day celebrations of the Punjab National Bank, in New Delhi on April 12, 2019.

New Delhi | April 12, 2019

“It gives me immense pleasure to be with you today on this historic occasion of the 125th Foundation Day of Punjab National Bank, an institution of distinguished heritage. It is heartening to note several milestones achieved by the bank as it confidently steps into the 125th year of its illustrious existence.

This remarkable journey is a living testimony of this institution’s indomitable spirit and commitment.

I understand that PNB’s journey began on 12 April, 1895 in Lahore, undivided India, as a culmination of the painstaking and enterprising efforts of its visionary founders, including the doyen of Indian freedom struggle, Lala Lajpat Rai, the Lion of Punjab.

These passionate nationalists established a Swadeshi bank, run professionally with Indian capital and management, to meet the financial needs and aspirations of their fellow Indians. It is heartening to note that this connect to the freedom struggle of the country is a source of abiding strength, pride and inspiration to the Bank.

I am happy to note that through all these years, even in the most testing of times, the Bank has won and retained the trust of all its Stakeholders - Customers, Employees, Shareholders, the Regulatory bodies and the Government.

It is heartening to note that combining business acumen with a tenacity of purpose and professionalism has taken PNB from its early humble origins to its present stature. It is a performance that has earned it a position of leadership, respect and pre-eminence in our banking industry.

I am happy to know that the bank has more than 6900 branches, the second largest number among public sector banks.

PNB’s saga brings to the fore what human enterprise and initiative can achieve in bringing about a lasting growth and development in the lives of the people of our country and indeed in the progress of our nation.

My dear sisters and brothers,

India’s financial institutions have been commended globally for being resilient and for having withstood global downturns and recessions well.

Banks are no longer just about strong lockers and a good interest rate on deposits. They have transcended their conventional mandates and are now at the forefront of India's development story.

In addition to fuelling dreams of Indian industry and entrepreneurs, banks are leading India’s quest for inclusive growth.

Financial inclusion and provision of banking services to the last mile is now the central theme of India’s banking expansion drive.

The banking system of India is a vast network consisting of 27 public sector banks, 21 private sector banks, 49 foreign banks, 56 regional rural banks, more than 1500 urban cooperative banks and close to 1 lakh rural cooperative banks, in addition to cooperative credit institutions.

In FY07-18, total lending marked a Comprehensive Average Growth Rate (CAGR) of 10.94 per cent and total deposits increased at a CAGR of 11.66 per cent.

It is indeed noteworthy that India’s retail credit market is the fourth largest in the emerging countries. It increased to US$ 281 billion on December 2017 from US$ 181 billion on December 2014.

India has one of the most evolved digital payments systems with India’s Immediate Payment Service (IMPS) being the only system at level 5 in the Faster Payments Innovation Index (FPII).

As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and well-regulated.

Indian banking industry has recently witnessed the roll out of innovative banking models like payments and small finance banks.

As of September 2018, India Post Payments Bank (IPPB) has been launched and has opened branches across 650 districts.

I firmly believe that that India’s banking sector is poised for robust growth as the rapidly growing business and commerce in India would turn to banks for credit and other financial services.

A number of positive trends would fuel the growth of the banking sector in the future.

The expansion and upward mobility of the middle class have transformed retail banking in India over the past decade. 89 million more households are set to join this social segment by 2025.

India is also witnessing a digital revolution. The falling cost of Internet access has facilitated the adoption of a number of paradigm shifting digital technologies and innovations.

The digital revolution has led to the creation of a number of low-cost Indian platforms to promote digital payments such as RuPay, a cheaper, domestic alternative to international credit or debit card gateways such as MasterCard and Visa.

The Unified Payment Interface (UPI), and the Bharat Interface for Money (BHIM), a mobile app based on UPI has driven a number of financial transactions online due to their ease of access and use.

Banks have to focus upon providing new and improved services to their clients and upgrading their technology infrastructure, in order to enhance the customer’s overall experience and gain a competitive advantage.

They also have to harness digital growth to scale up to the level of world-class businesses.

However, the banking sector continues to be plagued by a number of challenges.

The rising Non Performing Assets in the banking system is a cause for great concern. Mounting NPAs would certainly affect banks’ capacity to lend.

In the last few years, gross NPAs of banks as a percentage of total loans have increased from nearly 2 % of total loans in 2008 to nearly 10% in 2017.

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.

Our banks will need to maintain strict vigilance during pre- and post-sanction procedures of loans and never make compromises in the due diligence processes. They must constantly strengthen their internal processes to effectively monitor funds and maintain strict discipline in lending.

Time has come for a systemic reform of the Indian banking sector. There has to be an effective and efficient system of checks and balances in place so that the loop holes 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.

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. They must focus on nurturing internal skills for credit assessment and undertake forensic audits to understand the intent of the borrower.

Increasing cases of willful defaults and frauds have recently been in the news. We must spare no effort in bringing these individuals and entities to speedy and exemplary justice.

India must enter into more treaties for exchange of information and intelligence on financial fraud and work with international agencies in bringing defaulters to justice.

Banks must also at all times adhere strictly to the principles of business ethics and good corporate governance. A bankers' role is one of stewardship based on trust. Customers trust banks to safeguard and manage their money and banks have a duty to lend that money responsibly.

Ethical considerations should form an important part of risk-taking activities. The welfare of customers and other stakeholders in good times and bad should be a major concern in any business proposition.

Let me remind you that Mahatma Gandhi regarded “Commerce without morality” as one of the seven deadly sins.

My dear sisters and brothers,

This is a period of disruptions in the banking sector caused due to factors ranging from technology to innovative new business models. These disruptions present tremendous growth opportunities. I believe that banks, especially legacy ones, will need to make bold moves and initiate major transformations to take advantage of them.

I am sure that India’s banking sector will move forward and become more professionally advanced and responsive in the next few years.

Let me once again congratulate Punjab National Bank on this momentous occasion.

The success of an enterprise of this scale, magnitude and vision is a testimony to the skills, synergies and dedication of all the human resources associated with it. I felicitate the top management for providing able leadership and direction to the bank.

I compliment every employee of the bank for maintaining high standards of professional excellence.

Thank You!

Jai Hind!”