"Earlier, credit culture and discipline in the financial system was lax across various stakeholders. Shell companies for layered operations to siphon off funds, control of assets and continued access to funds despite default or being a fugitive abroad, non-availability of passport details and powers to issue look-out circulars with banks, and lack of assured checking for wilful default and fraud in high-value NPA cases, all led borrowers to believe that they could get away with default, wilful default or even fraud," she added.
The role of bankers too was also not as rigorously examined earlier, and auditors were not independently regulated, the minister noted.
Through extensive reforms, change in credit culture has been instituted and discipline tightened for every stakeholder in the financial system, which has enabled a decline in the occurrence of frauds, Sitharaman said.
The minister also said the RBI has issued comprehensive instructions in respect of security and risk mitigation measures related to electronic or digital transactions, including steps for securing card transactions like online alerts for all transactions, certification of merchant terminals, and conversion of all existing magnetic strip cards to EMV chip and PIN cards.
Replying to an another question, the finance minister said the ratio of gross non-performing assets (GNPA) to gross advances of banks as on March 31 of 2017, 2018 and 2019 (provisional data), were 9.3 per cent, 11.18 per cent and 9.08 per cent, respectively.
Public sector banks have been recapitalised by Rs 3,19,497 crore during the last five financial years from 2014-15 to 2018-19, including recapitalisation of Rs 1,30,225 during financial year 2018-19, she said.
Over the last four financial years, the minister said, PSBs were recapitalised to the extent of Rs 3.12 lakh crore, with infusion of Rs 2.46 lakh crore by the government and mobilisation of over Rs 0.66 lakh crore by themselves.
Replying to a separate question, Sitharaman said, the RBI has powers under other laws as well, which include, the power under section 12 of the Foreign Exchange Management Act, 1999 to inspect for compliance with the Act and rules etc made there under.
The RBI also maintains that the Central Repository of Information on Large Credits (CRILC) on aggregate fund-based and non-fund-based exposures of Rs 5 crore and above of all banks, she said.
Further, she said, the RBI maintains the Central Fraud Registry and banks report all frauds involving amount above Rs 1 lakh to the apex bank.
In addition, the RBI's master directions on frauds lay out guidelines on categorisation, reporting and review of frauds, along with norms for consequent provisioning, she said.
"The powers of RBI are wide-ranging and comprehensive to deal with various situations that may emerge in all banks, including public sector banks. The improvement in regulatory functioning being an ongoing process, Government engages with RBI and discusses issues as they evolve," she said.
In reply to another question, the finance minister said Asian Infrastructure Investment Bank (AIIB) has approved seven projects in India for an amount of USD 1.91 billion as of now.
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