The move is expected to generate an additional lending and liquidity in the financial system to the tune of Rs 5 lakh crore, she said at a press conference.
Sitharaman said that banks will launch repo rate and external benchmark-linked loan products that will lead to reduced easy monthly installments for housing, vehicle and other retail loans.
"Working capital loans for the industry will also become cheaper," the minister said.
Sitharaman said that to reduce harassment and bring in greater efficiency, public sector banks will ensure mandated return of loan documents within 15 days of loan closure. "This will benefit borrowers who have mortgaged assets.