'Government banks should explore derivative instruments market'

Indian public sector banks (PSBs) do not have any "meaningful participation" in BCD (bond currency derivative) instruments which is restricting the sector's development and needs to be better explored, a top official said here Saturday.

"PSBs need to engage proactively, especially in the derivate instruments for hedging their risks. Treasury function is relatively weak in PSBs," Reserve Bank of India (RBI) Deputy Governor R. Gandhi said at an event organised by the Bengal Chamber of Commerce and Industry.

PSBs, with capital of Rs.5,652 billion, are the dominating players in the Indian banking segment, accounting for a 72.1 percent market share in the last fiscal that ended March 31.

"A well-established and robust treasury is a must for the purpose; they must build up specialisation and should have sufficient number of specialists," he said.

According to the economist with more than 33 years of experience, a "selected set" of foreign and privately held banks dominate the financial market.

Besides, he said the PSBs need to review their imbalanced portfolios in loans and investment for the sectors, aim for financial inclusion as a key objective and adapt themselves to technological advancements.

"PSBs should have a relook on their portfolios... and should look at financial inclusion as a profitable business proposition and not as a matter of compliance with the RBI and government requirements," he said.

At present, for the PSBs, portfolio share in advances to agriculture is 13.9 percent, industries is 46.32 percent, services accounts for 20.93 percent and retail and other services together stands at 18.85 percent.