home Advertise
With Us

NPA crisis during UPA tenure stifled bank credit to startups, MSMEs: FM Nirmala Sitharaman

“This problem (of NPAs) starved the nation of essential credit flow needed for development. Banks became reluctant to lend to new borrowers, especially MSMEs, the backbone of economic growth and job creation,” FM Nirmala Sitharaman said.

Finance Minister Nirmala Sitharaman, on Friday, accused the Congress-led UPA government of turning “the banking sector into a cesspool of bad loans, vested interests, corruption and mismanagement” before 2014. The minister said banks were reluctant to provide loans required by small businesses to grow their businesses during the Congress rule. 

Analysing the current situation of India’s banking sector, which recently recorded over Rs 3 lakh crore in net profit, in comparison to the pre-2014 scenario, FM Sitharaman in a long thread of posts on X (formerly Twitter) said, “Congress-era reckless and imprudent lending created the disgraceful legacy of the ‘Twin Balance Sheet’ problem, which we inherited in 2014.”  

“This problem starved the nation of essential credit flow needed for development. Banks became reluctant to lend to new borrowers, especially MSMEs, the backbone of economic growth and job creation,” the minister said.

Sitharaman said that under the UPA, obtaining loans from banks often depended on powerful connections rather than a solid business proposition. “Banks were forced to neglect proper due diligence and risk assessment before sanctioning these loans. This led to a massive increase in Non-Performing Assets (NPAs) and institutionalised grafts.” 

The NPA crisis stifled the credit required to fund the dreams of crores of aspirational Indians who wanted to establish startups and expand small businesses, the minister said.

Importantly, the gross NPAs in MSME loans by scheduled commercial banks had dropped by 14.3 per cent to Rs 1.31 lakh crore for FY23 from Rs 1.54 lakh crore during FY22, Bhanu Pratap Singh Verma, Minister of State in the MSME Ministry had informed the Rajya Sabha in July last year.

GNPAs in MSMEs during FY23 were the lowest in the past five years, peaking at Rs 1.83 lakh crore in FY20 from Rs 1.63 lakh crore in FY19 and declining to Rs 1.82 lakh crore in FY21 before shrinking to Rs 1.31 lakh crore in the previous fiscal, FE Aspire had reported.