Finance Minister Arun Jaitley will meet the heads of public sector banks tomorrow to review the banks' performance and persuade them to pass on the RBI's rate cut benefit to borrowers to prop growth.
The meeting will review credit offtake and the progress made under the Jan Dhan Yojana, among other things, sources said. Reserve Bank of India has cut repo rate by 0.5 percent in the last two months but the banks have not followed up on that yet by reducing their lending rates.
Last week, the RBI reduced the short term lending rate (repo) from 7.75 percent to 7.5 percent with immediate effect. This was the second rate cut after January 15 when policy rate was reduced by similar percentage points.
According to sources, during the quarterly meeting attended by heads of public sector financial institutions such as Nabard and NHB, the Finance Minister would also review the progress made with regard to decisions taken at the two-day Gyan Sangam.
One of the decision taken at the retreat at Pune was setting up an autonomous 'Bank Board Bureau' with professional members to improve the governance of public sector banks. The proposed board would be responsible for search and selection of heads of PSBs, as also for non-official directors of the banks.
This would be an interim step towards moving in the direction of having a Bank Investment Company, which will be a holding company for PSBs.
The meeting would review various key financial sector issues like credit offtake in the economy, priority sector lending and progress made under Pradhan Mantri Jan Dhan Yojana (PMJDY). Improving the performance of the PSBs and financial institutions, including through steps like capital infusion, would also be discussed in the meeting.
Prime Minister Narendra Modi on August 28 launched the PMJDY scheme for promoting financial inclusion across the country.
As per the latest report a record 13.6 crore bank accounts had been opened under the scheme. As for infusing capital in state-owned banks, it has initiated the process of infusion of Rs 6,990 crore in nine lenders including State Bank of India, Bank of Baroda and Punjab National Bank.
The government has adopted new criteria under which more efficient banks get rewarded with extra capital infusion to help them further strengthen their position.
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