New Delhi: Finance Minister Arun Jaitley Monday asked state-owned banks to clean up their balance sheets at the earliest, stressing that they have all the powers to deal with wilful defaulters.


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The Minister during his meeting with heads of public sector banks (PSBs) also reviewed interest rate in the light of key policy rate reduction by RBI in September.


Besides, the institutional measures being taken to assist banks in reducing NPAs were also discussed in the second quarterly performance review in six months.


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The gross Non-Performing Assets (NPAs) of public sector banks rose to 6.03 percent at the end of June, as against 5.20 percent in March this year.


"When we took assessment of certain sectors which had a higher level of NPAs, some particular defaulters which are common thread running across several banks did crop up for discussion," he told reporters after the meeting.


The public sector banks, he said, "have all the powers... Banks today have full authority and autonomy to take action against them (defaulters)".


He asked the bankers to get rid of their past scars of Non Performing Assets (NPAs) and clean-up their balance sheet at the earliest.


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The issue of asset quality was discussed in detail and banks described measures being taken to improve asset quality and profitability with special focus on non interest income.


Committing full support, he said that the Government will take necessary policy corrective measures wherever required.


The meeting also discussed the issue of passing on the benefit of rate cut, with the PSBs noting that their base lending rates had been reduced consequent upon the rate reduction announced by the Reserve Bank.


Since January, RBI has reduced its benchmark rate by 1.25 percent but banks have not passed on the entire rate cut benefit to the borrowers.


PSBs discussed various steps being taken to improve credit growth.


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On Pradhan Mantri Mudra Yojana (PMMY), Jaitley asked the banks to accelerate disbursements as PSBs were expected to achieve a potential of at least Rs 70,000 crore during the current financial year.


It was noted that the Indian Banks' Association had put together a phased publicity plan, to ensure that eligible entrepreneurs were fully informed about PMMY, and thereby enabled to approach banks with their projects.


With regard to agriculture credit, he asked banks to achieve the target of 20 percent growth in disbursement and 15 percent growth in number of accounts and also attempt to even out regional disparity in such loans.


The banks briefed the meeting about various efforts that they are taking in the sector, an official statement said.


On education loan, progress made by banks in activating the Vidya Lakshmi Portal, which is a first-of-its-kind portal providing a single window facility for students to access information and apply for educational loans provided by banks as well as Government scholarships were reviewed.


Banks were requested to enter into the required agreement to take advantage of new credit guarantee scheme, it said.


While noting good growth at 18.69 percent in housing loans, PSBs were also strongly encouraged to achieve growth in priority sector housing loans, which are intrinsically secure loans and which are required to provide a stimulus to overall growth.


During the meeting, Anup Pujari, Secretary, Ministry of Micro, Small and Medium Enterprises (MSME) discussed issues related to MSME sector including financing by banks.


Secretary, Ministry of New and Renewable Energy (MNRE) briefed the meeting about the commitment of banks to fund Renewable Energy Projects in the next five years and praised the efforts made by banks.


At the same time, secretary, Ministry of Food Processing Industries briefed the participants about the utilization of Special Fund of Rs 2000 crore set-up to provide affordable credit to designated food parks (including mega food parks) and food processing units located therein.


Minister of State for Finance Jayant Sinha distributed trophies and certificate to the winners in the category of best banks and best bank branch in order to recognise the best performers who made Pradhan Mantri Jan Dhan Yojana (PMJDY) a successful scheme.