Finance minister Arun Jaitley on Monday asked state-owned banks to clean up their balance sheets at the earliest, stressing that they have all the powers to deal with wilful defaulters.
The minister during his meeting with heads of public sector banks (PSBs) also reviewed interest rate in the light of key policy rate reduction by RBI in September.
Institutional measures being taken to assist banks in reducing NPAs were also discussed in the second quarterly performance review in six months.
The gross Non-Performing Assets (NPAs) of public sector banks rose to 6.03% at the end of June, as against 5.20% in March this year.
“When we took assessment of certain sectors which had a higher level of NPAs, some particular defaulters which are common thread running across several banks did crop up for discussion,” he told reporters after the meeting.
The public sector banks, he said, “have all the powers... Banks today have full authority and autonomy to take action against them (defaulters)”.
He asked the bankers to get rid of their past scars of Non Performing Assets (NPAs) and clean-up their balance sheet at the earliest.
The issue of asset quality was discussed in detail and banks described measures being taken to improve asset quality and profitability with special focus on non interest income.
Committing full support, he said that the Government will take necessary policy corrective measures wherever required.
The meeting also discussed the issue of passing on the benefit of rate cut, with the PSBs noting that their base lending rates had been reduced consequent upon the rate reduction announced by the Reserve Bank.
Since January, RBI has reduced its benchmark rate by 1.25% but banks have not passed on the entire rate cut benefit to the borrowers.
PSBs discussed various steps being taken to improve credit growth.