PNB likely to urge govt to cut credit target

Faced with a slowdown in credit and deposit growth in the first six months of 2007-08, many public sector banks such as Punjab National Bank (PNB) may soon write to the government to lower the annual deposit and credit growth targets.

"We will soon write to the government for downward revision of deposit and credit targets for 2007-08," said PNB Chairman and Managing Director K C Chakrabarty.

Chakrabarty said 16-17 per cent growth in deposit and credit growth would be reasonable target for the entire fiscal. In the first six months, the bank has registered only 7-8 per cent growth in fresh credit and deposits.

State-owned banks in consultation with the government, fix deposit and credit growth targets for the entire fiscal in the beginning of every financial year. The deposit and credit growth targets of PNB is 24 per cent and 25 per cent respectively for 2007-08, sources said.

Monetary tightening by the RBI has led to slackening of credit demand in all segments of credit including corporate sector.

Chakrabarty said interest rates were stable at the moment, but all major banks need to curtail deposit rates, which are still high.

"Deposit rates are still high and it cannot come down if major players do not reduce rates," he said. Declining to comment on the RBI moves in the upcoming monetary policy review, he said he does not see any upward movement in lending rates in the next three months. PNB has already reduced peak deposit rates from 9.5 per cent to 8.75 per cent.

PNB's total deposits and advances stood at Rs 1,39,860 crore and Rs 96,597 crore respectively as on March 31, 2007.

Meanwhile, the bank has launched a pilot project in Rajasthan for financial inclusion of unbanked masses. The bank plans to launch the pilot project in nine more states, mostly in the North, to provide basic financial services with the help of biometric smart card.

The bank expects to issue 100 million biometric smart cards in the next two to three years and plans to rope in around 65 million new customers through the financial inclusion initiative.

Customers can carry out all kind of saving bank functions through the biometric cards. PNB is also in talks with government agencies, which can implement various schemes like pension through the biometric cards.

Among other initiatives, Chakrabarty said the bank is awaiting approval of RBI for starting a credit card business company in joint venture with Venture Infotech Global-American International Group (AIG) consortium. PNB will hold 45 per cent stake in the credit card JV. PNB also plans a joint venture bank in Bhutan.