Finance Minister Arun Jaitley on Tuesday asked public sector banks to take “effective action” in cases of fraud and wilful loan defaults. He expressed hope that formalisation of the economy would help India achieve a continuous Gross Domestic Product growth rate of 8%. The economy grew by 8.2% in the first quarter of 2018-’19.

Jaitley made the remarks at the annual review meeting of performance of public sector banks in New Delhi. The meeting was attended by 21 chief executives of such banks, the Ministry of Finance said in a tweet. Matters related to bank credit growth, financial inclusion and banking reforms were discussed during the meeting.

“A growing economy will also help banks grow in strength,” Jaitley said at the meeting. “Conversely, as lifelines of the economy, banks would need to build their strength to support the lending needs of a growing economy.”

A government press release said Jaitley also underscored the need to trust the banking system “as a necessary precondition for meeting the needs of the economy”.

At a media briefing after the meeting, the finance minister claimed that the impact of the promulgation of the Insolvency and Bankruptcy Code was “clearly visible”, ANI reported. “Non performing assets are on the decline as their recoveries have picked up,” he said.

The meeting came in the backdrop of the Centre’s decision to merge three state-run banks – Dena Bank, Vijaya Bank and Bank of Baroda. The government will continue to provide capital support to the merged entity.

India’s banking sector is grappling with rising non-performing assets. State-run banks account for the lion’s share of bad loans. Jaitley claimed that the erstwhile Congress-led United Progressive Alliance government had swept the problem of bad loans under the carpet.