Greater rate cuts by banks in offing: Jaitley

Public sector banks are to make "greater" cuts in interest rate in the coming days and weeks after Finance Minister Arun Jaitley today nudged them to transmit the benefit of the rate cuts made by RBI this year.

An assurance to this effect was given by the bank chiefs at a meeting where their financial performance and other parameters, including transmission of the RBI rate cuts, were reviewed, Jaitley told reporters after the meeting.

"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 Minister said.

Some of the banks, he said, 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.

As regards the bad loans, Jaitley said it has come down in the January-March quarter and hoped that the situation would improve further with pick up in economy and higher public spending, especially in infrastructure sector 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 said.

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.

On projects stalled for want of funds, Jaitley said the Financial Services Secretary will prepare a list of such projects and try to resolve the issue.

"Both the Secretary and if necessary at my level, we will be calling for a meeting of the representatives of the state governments, those projects and concerned departments, over the next few days and try to resolve the issues," he said.