Treasurer Josh Frydenberg says the flow of credit will be critical to Australia recovering from the recession.
The economy shrank seven per cent in the June quarter because of the COVID-19 pandemic, officially confirming the nation is in the first recession in three decades.
Mr Frydenberg said it was important for banks to "lean in" through the recovery.
"We have worked very closely with the banks and the Australian Prudential Regulation Authority to ensure the proper treatment of capital and loans so that more than $200 billion of loans could be deferred through this crisis to provide relief for the borrower," Mr Frydenberg told reporters on Wednesday.
He said in the past two weeks 13 per cent of borrowers with deferred loans had started to pay back the loans.
And there had been a 5.4 per cent increase in owner-occupier borrowing in recent months, with more than $1.5 billion flowing in loans to small and medium sized businesses.
"I'm confident the banks are seized of this task and the flow of credit through the economy is going to be absolutely critical to the recovery," Mr Frydenberg said.
Meanwhile executives from Australia's four major banks are set to face questions about their response to the economic shock.
ANZ and Commonwealth Bank will face the music via videoconference on Friday while Westpac and NAB will be probed the following Friday.
House of Representatives economics committee chair Tim Wilson said it was important to hold the banks to account.
"Since the start of the pandemic, the Australian government has introduced a range of support measures in cooperation with the banks," Mr Wilson said.
"It's really important that financial institutions are held accountable and that they are treating consumers fairly during what is a difficult time for many Australians."
The inquiry will also gain insights into the consequences of mortgage and small and medium business loan deferrals, and the potential for reform of "responsible lending" laws.
It will also be an opportunity for the banks to update the public on their response to the royal commission into financial sector misconduct.