ONGC opposes parking funds with state-run banks

State-run Oil and Natural Gas Corporation (ONGC) is against investing its surplus fund with PSU banks as giving business on nomination basis was causing loss of interest revenue to it.

"ONGC has expressed difficulty with the implementation of the government guidelines relating to investment of their surplus funds," Minister of State for Petroleum and Natural Gas Jitin Prasada said in a written reply to the Rajya Sabha.

ONGC has written to the government numerous times saying the state-run banks on getting assured business act in cartel, offering interest rates lower than even that on retail deposits.

"They have mainly pointed out that the process of placing deposits with banks without inviting competitive bids is causing loss of interest revenue," he said.

ONGC, which has a cash surplus of about Rs 18,000 crore, is losing Rs 200-300 crore in interest revenues annually after it was forced to discontinue the practice of calling competitive rates for parking its cash.

"It has been observed that the rates of interest offered by public sector banks on bulk deposits are less than the rates offered by them on retail deposits for the same period of maturity," ONGC Chairman and Managing Director R S Sharma wrote to Petroleum Secretary R S Pandey on September 3.

"The difference in some cases is as high as 225 basis points."

Sister PSUs BSNL, BHEL, NTPC and SAIL, too, have opposed the bailout of state-run banks at their expense.

Prasada said the finance ministry directive was issued "in order to avoid undesirable competition amongst banks leading to arbitrary hikes in deposit rates, resulting in adverse consequences for the economy".

The government, he said, had asked all PSUs to invest their surplus funds with public sector banks at their published card rates, without inviting competitive bids.

Sharma had, however, stated that the interest rates for bulk deposits offered by PSBs vary from bank to bank with a difference of up to 100 basis points. Some of the PSBs did not accept deposits on the bulk deposit card rates published on their websites.

"All these are in defiance to the guidelines of the Ministry of Finance by public sector banks (PSBs)," he said.

Sharma said private sector banks also sought placing deposit at their card rates without inviting bids, which "would not be a desirable practice".

ONGC, which had previously written to the government on the subject in July and August, wanted the finance ministry guideline to be scrapped and PSUs be allowed to call competitive interest rate bids from both PSBs and private sector banks.

"The board of the company (ONGC) is required to protect the interest of all the shareholders, including the private and minority shareholders, and maintain highest standard of corporate governance," he had added.