Consumption driving growth, predictable policies key for India's GDP: Nirmala Sitharaman

The finance minister urged banks to focus on the physical contact with customers as they go global and digital.

Pune: Domestic consumption is sustaining the growth momentum in the economy, and predictable policy support is essential to ensure that the pace of GDP expansion continues, Union Finance Minister Nirmala Sitharaman said on Friday.

Speaking at an event organised by SBI here, Sitharaman also said that a committee of bankers is looking into the issue of whether to allow exclusive distribution tie-ups for selling third-party products by banks or adopt an open architecture approach.

She also urged banks to focus on the physical contact with customers as they go global and digital.

The minister further said that the disinvestment process of IDBI Bank will continue going ahead.

"...consumption emerging out of its domestic market itself is able to sustain our growth, which is the fastest even now in the world," she said.

The finance minister said that while it is necessary for the consumption for the growth process to continue, it is also pertinent to have predictable policies.

"...unless our domestic manufacturing, agricultural growth, tourism, IT and related services sector are given that constant support, predictable support, India's growth story will be difficult to keep up," she added.

Stating that exports are also important, Sitharaman appreciated the work of exporters in the last few months amid the setbacks like the US tariffs, wherein they have found newer markets while facing troubles from one.

Replying to a question on policy support to the affected sectors because of the current Middle East crisis, she said the government will see what it can best do and added that things are very dynamic at present, with talks between the US and Iran being on.

She also reminded that the government has responded with a targeted package for the US tariff-impacted entities.

To a question on the asset quality impact at banks because of the Middle East crisis, Sitharaman suggested that there is no need to be concerned, as the non-performing assets are at a multi-decade low.

Answering a query on an open architecture approach when it comes to the sale of third parties' products by banks, she said a committee under the Indian Banks Association is looking into it.

"The IBA chairman with the IBA will be talking to banks to understand how best to go about it, what are the vulnerabilities by keeping one (entity), by keeping several ...all these are going to be worked upon," she said.

The comments from the finance minister led to a sharp correction in the stock of SBI Life, which depends on its largest Indian bank parent for a bulk of its premiums.

Amid the huge changes in the tech landscape being brought about by Anthropic's AI model Mythos, the FM said a meeting with banks was held in New Delhi on Thursday, and all the lenders have been asked to work together on it under the leadership of SBI chairman C S Setty, who also chairs IBA.

"In the coming weeks, there will be a lot of interaction within the banks, understanding where more investments will have to be made, what kind of technologies can come in, how AI itself can be used for countering this AI challenge," Sitharaman said.

Meanwhile, Sitharaman said that LPG demand is being "largely" attended to by the companies, and everybody is getting the cooking gas, but there were a few instances of challenge.

Stressing the need for banks to have better connect with customers amid the progress on the digital front, Sitharaman said the human element is the spirit of inclusion in banking.

Banks need to ask themselves if they are getting distant from customers amid the accelerated digitalisation, he said.

She was speaking at an event where SBI inaugurated a new local head office, which will serve the bulk of Maharashtra except the Mumbai metropolitan area and the Konkan region, which will continue to be served by the LHO in Mumbai.

Terming this as a strategic move for SBI, Setty said the state is very important as Maharashtra delivers sizeable business for the country's largest lender.