Pranab to review performance of banks on June 12

Finance minister will also discuss the road map for the current financial year

Finance Minister Pranab Mukherjee will meet the chairmen and managing directors of state-run banks on June 12 to review their performance for the previous financial year and will also discuss the road map for the current financial year.

The ministry will review public sector banks’ performance on growth of deposits and advances, non-performing assets (NPAs), return on assets and loan disbursal. Loan growth in the previous financial year — 2011-12 — was sluggish with interest rates staying at elevated levels. However, the last fortnight of the financial year saw a huge spurt in loan off-take, which helped advances to clock growth of 19.3 per cent, higher than the central bank’s projection of 16 per cent. Deposit growth for 2011-12 was 17.4 per cent.

Though a formal agenda is yet to be finalised, bankers said issues likely to top the agenda of the meeting include rising NPAs, financial inclusion, pension liabilities of public sector banks and flow of credit to sectors such as agriculture, infrastructure and micro, small and medium enterprises.

Issues in lending to distressed sectors, such as real estate, power, aviation and telecom may also be flagged off. Banks may be urged to join the New Pension System of the Pension Fund Regulatory and Development Authority.

The finance minister is likely to ask the banks to improve their lending to infrastructure and employment-generating sectors, while keeping a check on their bad loans.

Gross NPAs of public sector banks stood at 3.3 per cent in FY12.

At an event on Monday, Mukherjee had asked banks to act upon the Reserve Bank’s advice on appropriate NPA management.

To address the problem of exposure to sensitive sectors and bad loans, the ministry has suggested banks consider lending to large projects by forming a consortium and that if such a loan becomes an NPA in one bank, then all lenders in the consortium treat it as a bad loan. Banks have expressed reservations on such suggestions.

Banks may also have to give a report on performance of the ultra low-cost branches set up in the last two years in about 73,000 villages across the country.

To extend the reach of banking to the rural hinterland, banks were in 2010-11 advised to provide appropriate banking facilities to habitations with a population of more than 2,000 by March 2012.

In Budget 2012-13, Mukherjee proposed to extend the campaign to habitations with population of more than 1,000 in North-eastern and hilly States, and to habitations that had crossed 2,000 according to Census 2011.

The meeting comes at a time when bank chiefs are expressing concerns at increasing interference by the finance ministry in their day-to-day operations.

Ministry officials, on the other hand, defended the frequent advisories to the banks. “Government, being the majority shareholder in these banks, can give suggestions. We are not forcing them to accept whatever we are saying. Banks can discuss the suggestions in their board meetings and the board members are free to decide whichever way they consider appropriate,” said the official.