Reforms undertaken to strengthen credit discipline in public sector banks, says government
In a written reply to the Lok Sabha, Chaudhary said that both the Centre and the Reserve Bank of India (RBI) have acted to strengthen co-operative banks and public-sector lenders. The moves range from enacting the Insolvency and Bankruptcy Code and establishing the RBI's Central Repository of Information on Large Credits—allowing fraud and wilful default cases to be tracked and resolved more quickly—to deploying automated early-warning systems that flag potential bad loans.
Market-based tools to manage stressed assets, along with time-bound workflows for corrective action, have helped curb slippages and reinforce stability, he said.
Governance reforms at state-owned banks include arm's-length selection of top management through the Financial Services Institutions Bureau, appointing non-executive chairmen at nationalised lenders, widening the talent pool, and linking extensions for managing directors to performance. The Enhanced Access & Service Excellence (EASE) programme has benchmarked progress in governance, risk management, technology-driven banking, and human resources, the minister said.
Bank mergers have delivered economies of scale and stronger balance sheets, while accelerated technology adoption has boosted financial inclusion, improved efficiency, and enabled real-time service delivery. Digital payments, propelled by Jan-Dhan–Aadhaar–Mobile (JAM) integration, interoperable banking correspondents, the Unified Payments Interface, and direct benefit transfers, have surged.
The total volume of digital transactions jumped from 2.07 billion in FY18 to 22.83 billion in FY25, a compound annual growth rate of 41%. Transaction value rose from ₹ 196.2 trillion to ₹ 350.9 trillion over the same period.
UPI has been the standout, growing from 920 million transactions in FY18 to 185.87 billion in FY25, a CAGR of 114%. Transaction value climbed from ₹ 1.1 trillion to ₹ 261 trillion. In July, UPI logged a record 1.95 billion transactions in a single month.
The reforms, Chaudhary added, have also strengthened support for micro, small, and medium-sized enterprises through measures such as the Mutual Credit Guarantee Scheme, Emergency Credit Line Guarantee Scheme, a new credit-assessment model, and an expanded Credit Guarantee Fund Trust.
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