Chidambaram to meet heads of public sector banks on Monday

New Delhi: Finance Minister P Chidambaram will meet heads of public sector banks on Monday to take stock of their concern amid moderating growth and slowdown in investment.

The broad agenda of the meeting include direct benefit transfer, deteriorating asset quality and credit growth. The Finance Minister is likely to ask banks to increase lending to productive sectors to prop up growth, sources said.

Hit by poor performance of farm, mining and manufacturing sectors, economic growth in the October-December period this fiscal slipped to 4.5 per cent.

Sources said the Finance Minister is likely to ask banks to increase lending to productive sectors to prop up growth.

Despite many measures being taken by the government to promote investment, as many as 109 private sector projects, with proposed investments of Rs 1,000 crore or more each, are awaiting clearance from different ministries.

The high-profile meeting will be held a day before mid-quarter review of monetary policy by RBI. It is widely expected that RBI may reduce policy rates to prop up growth. The meeting is also likely to review banks' system and procedure to check money laundering activities in the light of recent sting operation allegedly showing some officials of three private sector banks indulging in such activities.

Deteriorating asset quality of banks may also come up for discussion during the meeting. 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 four 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 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.

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. Following the monetary action by RBI, many banks, including State Bank of India, Punjab National Bank, Oriental Bank of Commerce (OBC), reduced their lending rates.

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