Union Finance Minister Nirmala Sitharaman on Friday, 17 July alleged that a practice of 'phone banking' during the United Progressive Alliance (UPA) government's tenure from 2004 to 2014 led to massive non-performing assets (NPAs) and drove public sector banks into deep financial losses. She made these remarks while addressing a credit outreach programme in Narasaraopet, Andhra Pradesh.

The 'Phone Banking' Allegation

Sitharaman claimed that during the UPA era, political leaders in Delhi would telephone bank officials and direct them to disburse loans to specific individuals who were not creditworthy or eligible. She alleged these loans were never repaid, triggering a cascade of bad debt across the banking system.

'They started the phone banking system. The loans that were given were never repaid. Banks fell into debt,' she said.

The Finance Minister argued that this politicisation of credit decisions was the root cause of the NPA crisis that burdened Indian banks for years — a crisis that required significant regulatory intervention and capital infusion to resolve.

What Changed After 2014, According to Sitharaman

Sitharaman contended that Prime Minister Narendra Modi's government, which took office in 2014, reversed this approach by envisioning a model where banks proactively reach citizens rather than responding to political pressure. She highlighted collateral-free lending to street vendors and women as a direct outcome of this shift.

'We launched this programme to support street vendors by having the government provide the necessary guarantees for their businesses. Banks are providing low-interest loans without requiring collateral, benefitting both traders and women,' she said.

She added that the initiative was driven by the observation that small traders were previously forced to depend on moneylenders and middlemen for micro-finance, paying exorbitant interest rates. 'The NDA government's goal is to encourage individuals by granting loans based simply on eligibility,' she said.

Key Disbursements at Narasaraopet Outreach

At the event, Chief Minister N. Chandrababu Naidu and Finance Minister Sitharaman jointly distributed loans worth ₹3,216 crore to 1,03,246 beneficiaries under Central Government schemes. The sectoral breakdown included ₹2,363 crore for agriculture, ₹325 crore for MSME units, and ₹624 crore for housing, education, vehicles, and solar power projects.

The duo also flagged off ambulances donated by Union Bank under its Corporate Social Responsibility (CSR) initiative and distributed bicycles to girl students.

Chandrababu Naidu on Centre-State Financial Support

Chief Minister Naidu described the credit outreach as commendable, noting it served Self-Help Groups (SHGs), entrepreneurs, street vendors, and farmers. He credited Sitharaman with taking a firm stand on NPAs and driving a digital banking revolution.

'Bank loans serve as a foundation for a farmer's future, a youth's aspirations, a woman's empowerment, and an entrepreneur's investment dreams,' Naidu said, adding that the 'Runa Mela' (loan fair) format was saving citizens from predatory moneylender rates.

Naidu also outlined several Centre-backed interventions for Andhra Pradesh, including financial support for Amaravati, Polavaram, and the Visakhapatnam Steel Plant. He said the state is set to receive ₹7,707 crore from the Centre through the VB-G Ram G scheme and ₹40,000 crore to develop Rayalaseema as a horticulture hub. He also noted that rescheduling high-interest loans inherited from the previous state administration had yielded savings of ₹1,538 crore.

State Finance Minister Payyavula Keshav, Energy Minister Gottipati Ravikumar, Member of Parliament Lavu Sri Krishnadevarayalu, and representatives from various banks attended the event. With large-scale credit disbursements now framed as a political counter-narrative to the UPA's banking record, the outreach programme signals the BJP-TDP alliance's intent to consolidate its economic messaging ahead of future electoral cycles.