PSB chiefs to meet FM this month; to seek for clarity on accountability

While Subbarao had stressed that the government should try to restrict its ownership rights in banks through their boards,DK Mittal,secretary,department of financial services is known for regularly sending missives to PSBs.

Written by Surabhi | New Delhi | Published:August 9, 2012 1:20 am

Chiefs of public sector banks (PSBs) are hoping for some clarity on their accountability when they meet finance minister P Chidambaram later this month,following the recent tussle between the central bank and the finance ministry over the issue.

While the meeting,slated for August 18 is the newly appointed finance minister’s first meeting with PSB chiefs,it comes at a time when Reserve Bank of India Governor D Subbarao has expressed displeasure over the government sending regular policy directives independently of the banking regulator.

While Subbarao had stressed that the government should try to restrict its ownership rights in banks through their boards,DK Mittal,secretary,department of financial services is known for regularly sending missives to PSBs.

The meeting comes in the backdrop of high interest rates that are choking industrial production and consumer demand along with a possibility of drought in the country,which will increase the non performing assets of the banks. Chidambaram,who has recently taken over the reigns of the finance ministry,is taking stock of the economy to help revive the growth momentum.

“It is largely expected to review their performance as well as discuss problems being faced by them given that there is not enough credit off take and deficient rains,” said a source close to the development.

Besides,the capital requirement needs of banks to meet Basel III norms as well issues relating to financial inclusion are also likely to feature on the agenda. The finance minister is also expected to take a review of the design and product pricing of insurance policies,the source said. Pension Fund Regulatory and Development Authority chief Yogesh Aggarwal is also expected to attend the meeting.

In his speech after taking over the finance ministry last week,Chidambaram had expressed concern over the high interest rate regime that is proving to be a burden for borrowers. The minister had also promised to announce decisions to attract more people to invest in insurance policies.

State-owned banks including State Bank of India and Punjab National Bank have already started to express concerns over the deficient rains that could lead to higher defaults on loans. The government is also looking at the possibility of announcing a relief package for drought hit areas which could include restructuring of such loans. The last such meeting was called by former finance minister Pranab Mukherjee in June this year.

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