Union Finance Minister Arun Jaitley on Friday said that the Public sector banks gave an assurance that they will make “greater” cuts in interest rate in the coming days and weeks. He also told them to transmit the benefit of the rate cuts made by RBI this year.
The Finance Minister disclosed this after a meeting with the chiefs of PSU banks to review their financial performance and other parameters, including transmission of the RBI rate cuts.
“Some part of it (rate cut) have been passed on to customers, while some banks have not passed on. I feel over the next few days … some of the bankers felt that over the next few weeks, they would be in a position to work out greater cuts,” the Finance Minister said.
Jaitley also said that some of the banks have expressed their inability to pass on the rate cuts on account of problems with their respective balance sheets and higher rates on small savings schemes.
However, he said “the environment was optimistic. Since the movement in the banking sector appears to be for the better, this gives up a further hope of a greater recovery as far as economy is concerned.”
A number of banks, including the largest public sector lender SBI, have cut their minimum lending rates after RBI reduced its policy rates by 0.25 per cent on June 2.
Since January, RBI has reduced repo (lending) rate by a total of 0.75 per cent in three tranches. The repo rate now stands at 7.25 per cent.
Bad loans, Jaitley said, have come down in the January-March quarter and he hoped that the situation would improve further with the economy picking up and a rise in public spending, especially in infrastructure projects.
“In quarter ending March 2015, NPAs had come down from 5.64 per cent to 5.2 per cent. One quarter does not indicate a pattern. So I would wait for some more time before realising what the pattern is. Banks are themselves of the assessment that it would take them 2-3 quarters to reach a somewhat more greater comfort level,” he said.
On demands of PSU banks for greater capital infusion, Jaitley said there is a “merit” in their case and the government will seriously look into it. The final decision to this effect will be taken by the Cabinet, he added.
Meanwhile, the Government has earmarked Rs 7,900 crore in the 2015-16 Budget towards capital infusion in PSU banks. The RBI had said that the amount is inadequate and needed to be enhanced.