The Hindu Business Line : PSBs' lower growth targets not acceptable: Chidambaram

SOME frontline public sector banks have projected a lower growth in deposits and advances for the current fiscal, compared to the previous year, according to their Statements of Intent for 2005-2006 submitted to the Government.

Revealing this, the Union Finance Minister, Mr P. Chidambaram, said this was unacceptable, especially in view of the country's economic growth.

"If the rate of growth of the economy is maintained at 7 per cent, it is difficult to understand how business projections by public sector banks, especially deposit and advances, can evidence deceleration in growth.

"How can the perception of the bankers be so different from that of the rest of economy?" asked Mr Chidambaram, addressing the annual general meeting of the Indian Banks' Association (IBA) here on Saturday.

"This perception has to be remedied. Bank credit has to grow with the needs of the economy, and deposits have also to be shored up with aggressive mobilisation strategies." The Finance Minister said he did not want to name the banks that have projected lower growth.

Expressing concerns over the growth and efficiency parameters of PSU banks, Mr Chidambaram said public sector banks have been consistently outperformed by the new age private sector banks in deposit mobilisation.

"Even more distressing are the projections on the efficiency parameters," said Mr Chidambaram. "Indian banking sector is known not to have offered very good returns on capital."

The return on assets projected by PSU banks is also lower compared to those in emerging markets.

"The return on assets of Indian banks stood at 0.7 per cent as against 1.2 per cent of Singapore, 1.36 per cent for Malaysia, 1.42 per cent for Korea and 1.6 per cent for Brazil," he said. In 2004-2005, the fall in treasury income would have exerted pressures on the profitability parameters, said the Minister. "In the year 2005-2006, therefore, one ought to see the profitability and efficiency bouncing back but the Statements of Intent furnished by PSU banks do not hold out hope on this count, with stagnation or decline projected in the profitability parameters for most PSU Banks."

Mr Chidambaram said he did not intend to prod PSU banks to indicate over-ambitious and unrealistic targets. "However, we cannot accept targets which do not strategically mobilise the inherent advantages of PSU banks in terms of their footprint, manpower and, above all, sovereign ownership for achieving sustained improvement in efficiency, profitability and growth.

The Minister, however, praised PSU banks for the 20 per cent growth they achieved in farm credit and the commitment of 15 per cent increase in credit to SMEs.

Responding to the IBA's Chairman's suggestion for autonomy for PSU banks, the Minister said the issue was being examined.

The IBA has suggested more freedom for banks in areas such as remuneration package for the top management, delegation of powers to the respective boards for appointing statutory Central Auditors and doing away with the jurisdiction of the Central Bureau of Investigation and the Central Vigilance Commission over officers.

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PSBs' lower growth targets not acceptable: Chidambaram