Chidambaram to meet heads of PSU banks on Thursday

Finance Minister P Chidambaram will meet heads of public sector banks today and review financial performance and credit flow to productive sectors in the light of subdued economic activity, among other  issues.

The broad agenda of the meeting include review of first half numbers, deteriorating asset quality, credit growth, official sources said.

Non-performing assets of the banks have been on the rise for past several months due to slowdown in 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 total assets at the end of September, 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, they added.

The high-profile meeting will be held in the backdrop of the half-yearly review of monetary policy by the Reserve Bank of India (RBI) wherein central bank left benchmark interest rate unchanged on concern of inflation.

However, it reduced cash reserve ratio by 0.25 per cent to infuse additional liquidity of around Rs 17,500 crore into the financial system.

Accordingly, the CRR, or the portion of deposits banks have to park with the RBI, now stands at 4.25 per cent, while the repo rate, at which RBI lends to the system, has been retained at 8 per cent.

The reverse repo, at which RBI absorbs excess liquidity through borrowings from banks, remains at 7 per cent. Following the monetary action by RBI on October 30, many banks ruled out rate correction immediately.

However, SBI Chairman Pratip Chaudhuri earlier indicated that it could reduce lending rates in the next
two-three weeks to boost credit growth. "We had an ALCO (asset liability committee) meeting and there we did not cut the rates, but I am not ruling that out (rate cut). It could happen in the next two to three weeks," he had said.

SBI last reduced the base rate or the minimum lending rate in September this year. The base rate of SBI is at present stands at 9.75 per cent.

Meanwhile, RBI has also revised downwards the GDP growth estimate to 5.8 per cent from the earlier 6.5 per cent, while increased March-end headline inflation forecast to 7.5 per cent.