If there was one sector that was in crying need for help when the Modi government took power in 2014 it was banking. Reeling under the stress of burgeoning bad loans, the banking sector was plagued by shortage of capital and a crisis of confidence.The challenge was dealt with head-on by then finance minister Arun Jaitley in the first Budget presented soon after the general elections in 2014. Jaitley recognised the importance of the sector’s health to the overall health of the economy. 2014-15In his Budget speech in 2014, Jaitley said,”Financial stability is the foundation of a rapid recovery. Our banking system needs to be further strengthened.”In the same speech, Jaitley acknowledged that Indian banks need Rs 2,40,0000 crore as equity by 2018 in order to meet the stricter Basel 3 capital adequacy norms. He added that the government intends to offload stake in banks to general public without giving up controlling stake.In the same Budget, Jaitley also gave the first hints of Modi government’s inclination towards consolidation in the banking sector. He said,”There have been some suggestions for consolidation of Public Sector Banks. Government, in principle, agrees to consider these suggestions.”Jaitley also talked about the need for a financial inclusion mission that will meet the needs of the unbanked sections of the society. That eventually led to the Jan Dhan Yojana which went on to become the world’s largest financial inclusion programme.The same Budget also discussed the need for creating a framework by the RBI for differentiated banking to meet the niche requirements of the economy. That laid the foundation of small banks and payment banks.2015-16In the second Budget of the Modi government, Jaitley hoped that the vast postal network in the country will be used by the department to increase access of people to the formal financial system and also through its proposed payment bank. The same Budget also discussed the idea of a Bank Board Bureau to increase the governance of state-run banks.”In order to improve the Governance of Public Sector banks, the Government intends to set up an autonomous Bank Board Bureau. The Bureau will search and select heads of Public Sector banks and help them in developing differentiated strategies and capital raising plans through innovative financial methods and instruments. This would be an interim step towards establishing a holding and investment Company for Banks.”To increase the access of small businesses to formal credit, the government proposed the creation of a MUDRA bank.”Announcing the initiative, Jaitley said, “I, therefore, propose to create a Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs 20,000 crore, and credit guarantee corpus of Rs 3,000 crore. MUDRA Bank will refinance Micro-Finance Institutions through a Pradhan Mantri Mudra Yojana. In lending, priority will be given to SC/ST enterprises. These measures will greatly increase the confidence of young, educated or skilled workers who would now be able to aspire to become first generation entrepreneurs; existing small businesses, too, will be able to expand their activities. Just as we are banking the unbanked, we are also funding the un-funded.”2016-17Even as the discussions around the iconic bankruptcy law, the Insolvency and Bankruptcy Code, gained momentum, a similar framework for financial institutions was being envisaged. Jaitley acknowledged, while presenting the Budget, that a vacuum exists with regards to bankruptcy situation in financial firms. To fill the vacuum, he proposed a comprehensive Code on Resolution of Financial Firms. “This Code will provide a specialised resolution mechanism to deal with bankruptcy situations in banks, insurance companies and financial sector entities. This Code, together with the Insolvency and Bankruptcy Code 2015, when enacted, will provide a comprehensive resolution mechanism for our economy,” Jaitley said. Another major decision taken in the Budget was to provide a statutory basis for the Monetary Policy Committee which came into effect after an agreement between the RBI and the government in this regard in 2015. The government had announced the Indradhanush scheme for recapitalisation of state-run banks in 2015. In continuation of its support for the state-run banks which were reeling under the burden of bad debts, Arun Jaitley announced Rs 25,000 crore as recapitalisation measure for the banks. Also, the government announced in the Budget that it will initiate the process of consolidation of banks through the Bank Board Bureau.2017-18This Budget came in the backdrop of the government’s demonetisation measure taken in late 2016. While presenting the Budget, Arun Jaitley said that the impact is already visible in terms of lower interest rates and increased digitisation. “There is early evidence of an increased capacity of Banks to lend at reduced interest rates and a huge shift towards digitisation among all sections of society.” “The surplus liquidity in the banking system, created by demonetisation, will lower borrowing costs and increase the access to credit. This will boost economic activity, with multiplier effects,” Jaitley added.Jaitley allocated Rs 10,000 crore for bank recapitalisation in line with the Indradhanush roadmap. He also said that the legal framework for resolution of stressed assets has been strengthened with the enactment of the Insolvency and Bankruptcy Code and amendments to the SARFAESI and Debt Recovery Tribunals Act.The finance minister also doubled the lending target to Rs 2.44 lakh crore for FY18 from last year for the Pradhan Mantri Mudra Yojana, the flagship scheme to encourage small businesses.The finance minister also increased the allowable provision for Non-Performing Asset from 7.5% to 8.5% which would reduce the tax liability of banks.The idea of an electoral bond scheme was also announced during this Budget for which the finance minister proposed amending the RBI Act.2018-19Finance minister Arun Jaitley started off his Budget speech poring over the benefits of demonetisation stating that it reduced the quantum of cash currency and circulation in India. He also said that it “increased the taxation base and spurred greater digitisation of the economy”. He said that the Insolvency and Bankruptcy Code had changed the lender-debtor relationship and that recapitalised banks would support growth.Jaitley talked about the bank recapitalisation plan announced in 2017 which entailed mobilisation of Rs 2.1 lakh crore of capital including issuance of recapitalisation of bonds worth Rs 1.35 lakh crore.The finance minister ruled out the status of legal tender for cryptocurrencies. However, he said that the government would consider using the blockchain technology for ushering in digital economy.