A review of the monetary policy and its impact on the banking industry along with inflation would be top on the agenda in the meeting between finance minister P Chidambaram and public sector banks CEOs on May 1.
This would be the first meeting in 2008-09. Sources said banks are not expected to give their statements of intent in the forthcoming meeting as a number of them are yet to finalise their final balance sheets for 2007-08.
?However, the government is set to indicate what its expectations are from the banking industry to keep on the growth story while keeping a check on inflation,? a senior official of a bank said.
Notably, Chidambaram has been emphasising the need to reduce interest rates. Only once the banks are ready with their final financial results, it would be clear if they have been able to stick to their statement of intent.
Meanwhile, the Reserve Bank of India, on the other hand is set to implement monetary measures to rein in inflation. The central bank may further increase the mandatory cash reserve ratio from the current 7.5% to suck out liquidity from the system. Bankers said that in case such steps are taken, it may be difficult for PSU banks to reduce interest rates.
?The pressure is on the public sector banks as they have to remain competitive yet implement measures which may hurt their bottomlines,? an analyst said.
Though analysts are of the opinion that monetary measures would have little impact on rising inflation, indications are that RBI would take steps to curb it. ?This time inflation is not homegrown and therefore monetary measures may not have the desired impact,? an analyst said.