Chiefs of public sector banks (PSBs) on Tuesday sought relaxations in the Reserve Bank of India\u2019s (RBI) prompt corrective action (PCA) framework and asked the government to make \u201cupfront capital infusions\u201d in some of the PCA banks, finance minister Arun Jaitley said. \u201cSome of the banks said the PCA guidelines should be revisited because that is indirectly impacting their lending abilities,\u201d Jaitley said, adding that the government would take up the matter with the RBI. Under PCA, banks face restrictions on distributing dividends and remitting profits. Besides, the lenders are stopped from expanding their branch networks and need to maintain higher provisions. Management compensation and directors\u2019 fees are also capped. In an annual review meet with top PSU bankers, the minister has set an ambitious recovery target of Rs 1.8 lakh crore for them in FY19 compared with Rs 74,562 crore in FY18. The banks will also pursue monetisation of non-core assets worth Rs 18,665 crore in FY19. PSBs made recovery of Rs 36,551 crore in the first quarter of the current fiscal, up 50% over the same quarter of the last fiscal. Non-performing assets of public sector banks are on the decline as recoveries, helped by various steps taken by the government, have picked up, Jaitley said. While the banking-system liquidity tightened for the second consecutive week and markets are roiled, he said the lenders are confident of maintaining liquidity for various sectors as required. \u201cDebtors are paying in anticipation of the IBC (Insolvency and Bankruptcy Code) catching up on them,\u201d the minister said. But he advised the banks to give the same thrust to non-IBC recoveries as well. Speaking to reporters after the review meet, Jaitley added, \u201cRecoveries are better, the lending ability of banks is much better and to top it all credit growth has significantly moved upwards.\u201d \u201cWe are passing through a phase of good growth as far as the economy is concerned. Consumption has moved up, and therefore the banking activity is bound to pick up,\u201d he added. According to CARE Ratings, there was a sharp rise in the net liquidity deficit in the banking system during the week ended September 21, with the average deficit widening from Rs 14,496 crore in the previous week to Rs 1,30,358 crore. Outflows on account of advance tax payment, intervention in the forex market to stem the rupee\u2019s decline and festive demand has been pressuring liquidity in the banking system. Tuesday\u2019s meeting took place in the backdrop of the \u2018Alternative Mechanism\u2019 (AM) deciding to merge three public sector banks \u2014 Bank of Baroda, Vijaya Bank and Dena Bank \u2014 with a view to creating a global-size lender which would be stronger and sustainable. Jaitley asked PSBs to take \u201ceffective action\u201d in cases of fraud and wilful loan defaults, as he exuded confidence of achieving a sustained economic growth rate of 8%. \u201cAt the same time,\u201d he told the banks \u201cto ensure all steps at their end to ensure clean lending and effective action in cases of fraud and wilful default, to justify the trust reposed in banks. Banks must strive to be seen always as institutions of clean and prudent lending.\u201d He said the amendment of IBC to debar wilful defaulters has had the unintended positive consequence of defaulting borrowers stepping forward to make payment in order to participate in the resolution process. As for capitalisation, PSBs were offered Rs 90,000 crore (of which Rs 80,000 crore was in the form of bonds) in 2017-18 and securities worth another Rs 65,000 crore are to be provided to them in the current fiscal. Any further infusion, if finally approved, ahead of an election year could be done through recapitalisation bonds \u2014 which will be the government\u2019s off-Budget liabilities \u2014 to avoid worsening the fiscal deficit. However, the interests on such bonds are part of the Budget. Elaborating on the PCA norm relaxation demand, financial services secretary Rajiv Kumar said banks sought some leeway in the provisioning norms, the threshold-1 level, the way lending starts and the risk weights assets assigned, so as to allow them headroom for growth.