Finance Minister Nirmala Sitharaman will hold a meeting with heads of public sector banks on Saturday to review financial performance of the lenders and their business growth, sources said. Given the importance of the banking sector in generating demand and boosting consumption, the sources said the meeting with the MD and CEOs of PSBs ahead of the Budget 2020-21 is considered important.
Sitharaman is expected to present her second full Budget on February 1.
The meeting is also expected to take up discussion on non-performing asset recovery through both NCLT and non-NCLT means, the sources said.
Banks have recovered Rs 4,01,393 crore over the previous four financial years, including record recovery of Rs 1,56,702 crore during 2018-19.
The meeting is expected to take stock of the banking sector and pushing loan growth, the sources said adding that the banks may be nudged to further cut interest rates to fully pass on transmission of the repo rate cut.
Despite the Reserve Bank of India (RBI) making credit cheaper, lending rates are rising for borrowers after accounting for inflation and falling economic growth.
Economic growth has fallen to over six-year-low of 4.5 per cent in the September quarter and is widely expected to slip further with almost all key components of the economy contracting.
The RBI has responded by cutting rates by 110 basis points to a nine-year-low of 5.40 per cent.
As bad loan recognition process nears completion, gross non-performing loans of banks improved to 9.1 per cent as of end-September 2019, compared to 11.2 per cent in 2017-18, says an RBI report.
However, the numbers indicate major improvement on a full-year basis, as in 2017-18, the ratio stood at a high of 11.2 per cent and slipped to 9.1 per cent in 2018-19, the RBI said in its annual report on trends and progress of banking in 2018-19.