In the back drop of rising interest rates and downward growth risks, finance minister Pranab Mukherjee has convened a meeting of all chiefs of public sector banks, Sidbi and India Infrastructure Finance Company (IIFC ) and regulators like Reserve Bank of India, National Housing Bank on July 8 to discuss the strategies to manage the dynamic situation ?The finance minister wants to take stock of the situation on several issues linked to inflation and growth. We will give our views about the rising rates, credit growth, non performing assets and our possible performance in 2011-12. The overall situation remains very fluid,?? said a chief of PSU bank.

The minister will also check about the credit flows to the SME sector which has been affected by the spate of rate hikes. The other banking related issues which will be discussed in the forthcoming meeting includes credit flow to education, agricultural sector for which the government has announced subsidies.

Also, the issue of financial inclusion, whose target has been revised upward recently, will deliberated in the meeting.

Mukherjee recently while addressing the banks at the Indian Banks? Association (IBA) in Mumbai had expressed his concern over the asset quality of the banks.

?There is one area though, where I am little concerned. It is the issue of asset quality. During the year 2010-11, non performing assets (both gross and net) have increased as against the level in the previous year. It is important for the banks to constantly monitor and bring down the NPA to the previous level,? he had said, adding that the government had accorded high importance to financial inclusion to cover the entire gamut of financial services pertaining to savings, credit, insurance and transfers.

DL Rawal, CMD, Dena Bank, said the banking industry was able to perform well during the last fiscal. But, this year the industry may not be able to achieve that much growth.

?The reason for this is that the GDP growth is likely to be moderated to 7.8% to 8%, compared to the last fiscal?s 8.6%. Rate hike will also have its impact. Secondly, Casa in the industry may not increase that much as term deposits have become more lucrative now,? Rawal said.

?Also, I do see some moderation in home loan portfolio this fiscal, Same thing may happen in infrastructure sector too,?? he added.

Bhaskar Sen, CMD, United Bank of India, also agreed that banks had performed better during the last fiscal.

But, this year, the case will be different as the banks see lot of challenges on credit and deposit growth, asset quality and financial inclusion.

Apart from the heads of all the state-owned banks including the associates of State Bank of India, chiefs of otherPSU organisations like Sidbi and IIFCL officials from the regulators like Reserve Bank of India, Nabard and National Housing Bank (NHB) will also be present during the meeting.