Chidambaram to meet heads of PSU banks on March 18
Amid moderation in economic growth, finance minister P. Chidambaram is likely to prod banks to step up lending at a meeting with heads of public sector banks on March 18.
The broad agenda of the meeting include direct benefit transfer, deteriorating asset quality and credit growth. Non-performing assets of the banks have been on the rise for past several months due to slowdown in the economy. The Gross NPAs of some public sector banks, including State Bank of India, Punjab National Bank and Central Bank of India, have crossed 4 per cent of the total assets at the end of December, 2012.
Gross NPAs of PSU banks jumped to Rs 1,84,193 crore in December 2012 compared to Rs 1,37,102 crore in March 2012. The gross NPAs in corporate lending rose to Rs 98,884 crore in December 2012 as against Rs 68,221 crore in March 2012, while in case of farm loan, the gross NPAs rose at Rs 30,800 crore in December 2012 as against Rs 24,827 crore in March, 2012.
Hit by poor performance of farm, mining and manufacturing sector, economic growth in the October-December period of the current financial year slipped to 4.5 per cent — decade’s lowest quarterly growth.
Chidambaram is likely to ask banks to increase lending at the meeting on March 18, official sources said. The meeting will also dwell upon steps to increase credit flow to micro, small and medium enterprises (MSMEs), farm sector, infrastructure and housing sector, sources added.
The high-profile meeting will be held a day before mid-quarter review of monetary policy by the Reserve Bank of India (RBI). It is widely expected that RBI may reduce the interest rate to prop up growth. In its third quarter policy review on January 29, RBI had lowered key short-term lending rate by 0.25 per cent and also injected Rs 18,000 crore liquidity through similar reduction of Cash Reserve Ratio.
The repo rate, at which RBI lends to banks, was eased after a gap of nine months as the central bank fought the stubbornly high inflation through tight money policy, leading to high interest rate regime. Following the monetary action by RBI, many banks including State Bank of India, Punjab National Bank, Oriental Bank of Commerce (OBC) reduced their lending rate.
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