Finance Minister P Chidambaram has asked banks to review their lending rates and urged them to focus on top loan defaulters and take action against them to check the rise of bad loans.
The minister met the heads of public sector banks and financial institutions in the national capital on Wednesday.
"Reduction in base rate will be powerful stimulus to boost credit growth," he told the banks, adding that unless the base rate is cut, interest rates cannot be brought down.
While the the Reserve Bank of India (RBI) has
reduced the policy rates by 1.25 per cent since January 2012, to prop up growth, banks have lowered the lending rates by only 0.30 per cent during the period.
While noting that gross non-performing assets (NPAs) of PSU banks have risen from Rs 71,080 crore as on March 2011 to Rs 1.55 lakh crore as on December 2012, the finance minister urged banks to review their policy against loan defaulters and take action against them.
"You focus on the top defaulters, as well as keep on eye on the top performing accounts... They are keeping a close watch on the top 30 non-performing accounts in each bank and action will be taken on the defaulters," Chidambaram said.
The gross NPAs of some public sector banks, including
State Bank of India and Punjab National Bank have crossed 4 per cent of the total assets at the end of March 2013.
Chidambaram also reviewed the credit to agriculture, Micro Small and Medium Enterprises (MSMEs) sector, housing, education, minority communities and also financial inclusion.
He further said that the banks would
open over 8,000 new branches this year and hire over 50,000 people.
With inputs from PTI
Finance Minister P Chidambaram 
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