Finance Minister P Chidambaram will meet chief of state-owned banks, in Delhi on Tuesday to review loan growth and take stock of the rising bad loans.
As a part of the meeting, the finance minister is likely to seek details on lending to the retail and priority sectors, said bankers. “Even in the past, the finance minister has insisted on these points and said that banks should pay attention to them. It will be a general performance review,” said the chairman and managing director of a public sector bank.
Earlier this month, the finance ministry had advised banks to consider cutting rates for retail customers during the festive season to help boost demand. The ministry had publicly said any infusion of additional capital should help lower the cost of funds for banks and allow them to offer cheaper loans in the two wheeler and consumer durables segments. Following this, a number of banks including State Bank of India, Punjab National Bank, Union Bank of India, Indian Bank and Syndicate Bank had announced special festival discounts on retail loans also cutting down on processing fees.
Funds raised and brought in via the special swap facilities being offered by the Reserve Bank of India are also likely to be discussed at the meeting, said bankers. RBI had offered a discounted swap rate of 3.5% on foreign currency non-resident (FCNR) deposits starting September. PSU banks had been given unofficial targets on funds to be raised via FCNR deposits with State Bank of India asked to raised $2 billion. Bank of Baroda and Bank of India were told to raise $1 billion each.
“They will see how much money has come in through these windows as they will close shortly,” said another senior banker. According to the RBI, $5.6 billion had been raised under the two swap facilities offered by early October. The windows are due to close by November 30.
Bankers also expect the finance minister to focus on rising non-performing assets (NPAs) across most state-owned banks. Apart from borrowers defaulting on repayments, a large number of corporate borrowers are also seeking corporate debt restructuring. The corporate