Govt proposes quarterly targets for PSBs

The Union government has proposed that public sector banks should set quarterly targets for credit disbursal to avoid bunching of the disbursals in the last quarter of a financial year.

State-owned banks, however, said the proposal did not take into account the business cycle and the seasonality of credit requirements. Banks have said the annual target for the financial year should, instead, be divided into over two periods. The issue of setting the targets for credit disbursal was discussed at a review meeting of the finance ministry chief executives of public sector banks in the last week of April.

For the first half of a a financial year (April-September), which is marked by subdued economic and business activity, the target could be set at 40 per cent of annual credit disbursals. The remaining 60 per cent could be set for the second half (October-March), which coincides with the festive season, said an Indian Banks' Association executive.

A number of chief executives had said besides seasonality of the credit requirement, the drawdown of project loans also hit even growth. The growth on loans may not be evenly spread during the year and may differ from bank to bank. Last year, there was a sharp rise in loans to telecom companies for the payment of spectrum fees in the second quarter. However, there are one-off events, said the chief financial officer of a Mumbai-based large public sector bank. Usually, the first quarter of a financial year is marked by subdued demand, while the second quarter sees a rise in demand. A major rise in demand is seen from the third quarter, he said.