Bihar government has revoked the ban imposed on private banks, so far as deposits of government money was concerned. It has allowed its departments and undertakings to do business with Axis Bank, a private sector bank. However, the state government has decided to keep a close watch on the performance of the bank.
Last year the state government decided not to keep its money in any private banks, due to poor cash deposit ratio (CDR) of these banks.
In August this year, it extend this proscribe to those nationalised banks also, which got low rankings in terms of CDR, agricultural loans, priority sector lending and issuance of Kissan Credit Card (KCC). It directed its officers to withdraw government funds from these banks and ordered not to deposit any government money until they improve their lending performance.
However, now the state government has decided to exempt seven banks from this proscribe. "This decision was taken after finding noticeable improvement in their performance," said Sushil Kumar Modi, Deputy CM. The banks exempted are Dena Bank, State Bank of Bikaner and Jaipur, Oriental Bank of Commerce, Indian Bank, Indian Overseas Bank, United Bank of India and Axis Bank. He added, "We will now keep government money in these banks, but we will also keep a very close watch over their lending performance. If the latter takes a dip, we will send the bank's name in the prohibited list."
On inclusion of Axis Bank, a private sector bank, he said, "The state needs money for development. We need advances; it does not matter whether they come from private or public sector banks. Axis Bank management had informed us about their improved performance, so we agreed to keep government money in their Bank." However, the state government declined a similar request from ICICI Bank. The Deputy CM said, "They (ICICI Bank management) have also requested us, but their CDR is very low. So, we declined their request." According to government sources, ICICI Bank's CDR in the state is around 20%.