Fall in bad debts and credit growth of the public sector banks and financial institutions are among the issues listed for the quarterly review meeting called by the Finance Minister Arun Jaitley on Friday.

Private sector bank heads are also expected to participate in the meeting.

Bad debts of public sector banks dipped to 5.2 per cent at the end of March 31, 2015, from 5.63 per cent recorded as on December 31, 2014.

Bad debts have declined during the quarter ending March 31 mainly on two accounts — banks have managed to recover more and some stalled projects have revived. As on March 31, the total number of wilful defaulters was 7,035 with an outstanding amount of about ₹58,800 crore. Of this, banks filed suits in 6,102 cases (outstanding amount of over ₹51,400 crore).

Two issues that are likely to hog the limelight in the meeting are — transmission of policy rate cuts by public sector banks and more capital for public sector banks.

The Reserve Bank of India (RBI) has cut the key policy rate (repo rate) by 75 basis points since January, but public sector banks have lowered their base rate by not more than 30-40 basis points.

The Finance Ministry and the RBI want banks to pass on more of the rate cuts to consumers so that credit growth picks up.

Meanwhile, on the issue of more capital for public sector banks, the RBI has said that ₹7,940 crore earmarked for recapitalisation of PSU banks in the current fiscal is not adequate. It has also asked Finance Ministry to increase the quantum of assistance in view of mounting bad loans and to support growth.

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