The assurance follows a two-day brainstorming meeting last week in Pune where Prime Minister Narendra Modi discussed ideas to improve the health of state lenders, who are facing mounting bad loans and corporate governance issues.
"The banks and financial institutions should take all commercial decisions in the best interest of the organisation without any fear or favour," the ministry said in a statement on Tuesday.
"All decisions should be taken based on facts of the case and objectivity," the statement said.
For years, political interference and union opposition have thwarted major reforms at the lenders that account for more than 70 percent of total outstanding loans in the sector.
State banks recorded the highest level of stressed loans at 12.9 percent of their total advances in September last year, while the same ratio for private sector banks was at 4.4 percent, according to the latest central bank data.
Copyright: Thomson Reuters 2014