FM to meet bosses of PSU banks on Saturday

Finance Minister Pranab Mukherjee will meet PSU bank chiefs on August 14 and is likely to discuss the impact of the hike in lending rates for existing borrowers by banks following the RBI's monetary tightening steps.

Sources said the meeting will discuss the impact of a number of banks raising their benchmark prime lending rates (PLRs), which will affect auto, home and education loan costs for existing borrowers.

Lenders like Punjab National Bank, Bank of Baroda, Oriental Bank of Commerce, Corporation Bank and IDBI hiked PLRs following the RBI move to raise key short-term borrowing and lending rate by 50 and 25 basis points, respectively, to control double-digit inflation.

Since July, the system of PLRs has been replaced by a base rate, which is a floor for lending rates. However, existing customers are linked to PLR unless they decide to switch over to the base rate system.

Sources said the Finance Minister will also take stock of the financial performance of the banks and their projections for the current year.

He will also dwell upon credit flow to productive sectors, sources said.

Banks have announced their annual results for 2009-10 and most of them would come up with their first quarter results for this fiscal by the time the meeting takes place.

The agenda of the meeting also includes a review of credit growth, including to the agriculture and infrastructure sectors, and banks' networks in unbanked blocks, sources said.

Among others, capital adequacy over the medium-term and housing and education loans would also be taken up in the meeting, sources said, adding that even the capital infusion by the government to banks could be discussed.

One of the key points of discussion in the meeting would be financial inclusion to provide appropriate banking facilities to habitations having a population above 2,000 by March, 2012.

It is to be noted that the Finance Minister had a meeting with bankers and chief ministers of four regions. The fourth and last in the series of regional meetings held by Mukherjee was held on July 20.

Similar meetings were earlier held in the eastern and northeastern states, west and central zones and northern states.

Besides public sector banks, heads of apex agriculture bank Nabard, small sector bank Sidbi, infrastructure lender IIFCL and export-import lender Exim Bank will participate in the meeting.