NEW DELHI (Reuters) -India’s state-run banks are confident of withstanding any macroeconomic shocks and expect their outlook to improve, despite headwinds in the global banking sector, the finance ministry said on Thursday.

The asset quality of India’s state-run banks has improved with gross non-performing assets – the measure of a bank’s bad loans – at 4.97% in March 2023, the ministry said in a statement released after a meeting between the finance minister and heads of various state-run banks.

The finance minister has asked banks to ensure there is a fair and transparent recognition of non-performing assets and to take steps to improve deposits, the ministry added.

The government has also asked banks to increase credit to the rural and agricultural sector and ensure so-called priority sector lending targets are achieved across all sub-categories, according to the ministry’s statement.

India’s priority sector lending requires banks to dedicate credit to aid development of the sectors designated as crucial to the nation’s development such as agriculture and small and medium businesses.

(Reporting by Tanvi Mehta and Shivangi Acharya; Editing by Jan Harvey and Hugh Lawson)