Union Finance Minister Shri Pranab Mukherjee held a meeting with Financial Sector stakeholders to get their inputs for General Budget 2011-12, here today. This was the sixth meeting in the series of pre-Budget consultations held by Finance Minister with the stakeholders of different sectors. First meeting was held on 7th January with the stakeholders of agriculture sector followed by meetings with captains of Indian industry on 11th January, representatives of different trade unions on 12th January, 2011, different NGOs on last Friday i.e., 14th January, 2010 and with noted economists yesterday i.e., 17th January, 2011.
Welcoming the financial sector stakeholders, Finance Minister, Shri Pranab Mukherjee said that the group present there is working in diverse areas including banking, capital markets, insurance, infrastructure finance, rural credit, housing finance and micro-finance and many of their efforts are concentrated in less developed regions of the country. He said that he expects that their inputs would help in Budget making and improving the policy management of the economy in the coming months.
Finance Minister said that the country has been fortunate in surviving the global financial crisis without major disruptions and has recovered its growth momentum much faster than most others. In the first half of 2010-11 the Indian economy recorded an overall GDP growth of 8.9 per cent which took us back on the high growth path that the economy was traversing on in the years prior to the crisis. The recovery has been broad based with agriculture, industry and services all contributing to the consolidation of the growth momentum, added the Minister.
Shri Mukherjee said that in the post-crisis period, financial stability has become an integral part of policy discussions and macroeconomic objectives globally. It refers to a robust functioning of various financial system components – markets, institutions and market infrastructure. A sound and resilient banking sector, well-functioning financial markets, robust liquidity management and payment and settlement infrastructure are the pre-requisites for financial stability, he said.
The Minister said that as a part of the reforms in the financial sector in India, an apex-level Financial Stability and Development Council (FSDC) have been set up with a view to strengthen and institutionalise the mechanism for maintaining financial stability. Without prejudice to the autonomy of market regulators, this Council would undertake macro prudential supervision of the economy and address inter-regulatory coordination issues. It would also focus on financial literacy and financial inclusion. It has also been decided to set-up a Financial Sector Legislative Reforms Commission (FSLRC) to rewrite and clean up the financial sector laws and bring them in line with the requirements of the sector, he said.
Finance Minister said that the banking system has come into sharper focus after the global crisis. The fact that India has not gone through any financial turbulence, as a result of the earlier phase of financial deregulation is a testimony to our consistent view that reforms in global standards have to be adapted to local conditions. However, the cost of banking intermediaries in India is high and bank penetration is limited to only a few customer segments and geographies. The Minister said that the Government is trying to address this in collaboration with the Reserve Bank of India, but much more is needed to be done.
Shri Mukherjee emphasized that financial inclusion is a key determinant of sustainable and inclusive growth. Access to affordable financial services – especially credit and insurance – enlarges livelihood opportunities and empowers the poor to take charge of their lives. It is critical to connect the banked and the unbanked sectors and enable the unbanked to become vibrant and productive participants in the process of economic growth. The Government has accorded high importance to financial inclusion to cover the entire gamut of financial services pertaining to savings, credit, insurance and transfers, he added.
The Minister said that he would like to hear their specific suggestions to address the short and medium term concerns in the Indian financial sector and in the rest of the economy. Shri Mukherjee added that their advice, suggestions and even their warnings can have deep consequences for the Indian economy.
Among those who attended the meeting include Shri O.P. Bhatt from State Bank of India, Shri K.R. Kamath from Punjab National Bank, Shri Arun Kaul from UCO Bank, Shri R.V. Verma from National Housing Bank, Shri Rakesh Singh from NABARD and Shri Uday Kotak from Mahindra Bank Ltd.