Your monthly installments will come down further, assures Finance Minister Jaitley

EMIs of home, auto and other loans are likely to come down further with Finance Minister Arun Jaitley saying that banks have promised greater rate cuts in the coming days and weeks.

After discussing a host of issues like transmission of rate cuts, problems of higher bad loans and health of the economy with heads of state-owned banks, the Minister told reporters that financial services secretary would look into projects held up for want of funds and exuded confidence that soon economy would move to higher growth trajectory.

The government, Jaitley said, would also consider favourably the demand of PSU banks for more capital infusion, over and above what was earmarked in the budget for 2015-16.

As regards the transmission of rate cuts by the Reserve Bank, the Minister said the banks gave detailed presentation on how each one of them reduced their lending rates.

"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 banks, Jaitley said, expressed their inability to pass on the rate cuts on account on problems with their respective balance sheets and higher rates on small savings schemes.

However, he said that "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."

Many banks, including the market leader SBI, had cut interest rates after RBI reduced repo (lending) rate by 0.25% in its second bi-monthly monetary policy on June 2.

RBI since January had reduced the repo rate by a total of 0.75% in three tranches. 

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 Budget 2015-16 towards capital infusion in PSU banks. The RBI had earlier 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.

As regards the non-performing assets (NPAs), Jaitley said the situation has improved in the January-March quarter, but it is important to watch the developments over the next 2-3 quarters before reaching any conclusion.

"In quarter ending March 2015, NPAs had come down from 5.64% to 5.2%. 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.

The Minister also expressed the confidence that NPA situation would improve with greater spending thrust of the government and further pick up in the economy.