The Finance Ministry on Tuesday reviewed the performance of public sector banks (PSBs) in the backdrop of the first quarter numbers and asked them to step up lending to productive sectors of the economy.

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The meeting chaired by Financial Services Secretary Sanjay Malhotra also deliberated on the need to cut non-performing assets and drive financial inclusion, sources said.

Managing directors and executive directors of all public sector banks who participated in the meeting were asked to focus on credit growth during the festive season, beginning in September.

There was a comprehensive review of the progress of various government schemes, including the Kisan Credit Card, Pradhan Mantri Mudra Yojana, StandUp India, Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY).

The secretary also reviewed the performance of banks with respect to lending towards Animal Husbandry, Dairying and Fisheries sectors.

PSBs have raked in more profits in the three months ended June on the back of a persistent decline in bad loans and the trend may have a positive bearing on their balance sheets in the coming quarters.

In the June quarter, the Bank of Maharashtra (BoM) and State Bank of India (SBI) were in the lowest quartile as far as Gross Non-Performing Assets (NPAs) and net NPAs were concerned, according to an analysis of the quarterly financial numbers published by the public sector lenders.

Cumulatively, all the 12 public sector banks reported a profit of about Rs 15,306 crore in the three months ended June, registering an annual growth of 9.2 per cent. However, leading public sector lenders -- SBI and PNB -- posted lower profits in the June quarter.

During the April-June period of the previous fiscal, state-owned banks recorded a total profit of Rs 14,013 crore.