The Hindu Business Line : Deposit funds with public sector banks, PSUs told

Money matters: (From left) Mr R.S.P. Sinha, Chairman and Managing Director of MTNL; Dr U.D. Choubey, Chairman and Managing Director, GAIL; Mr R.S. Sharma, Chairman and Managing Director, ONGC; and Mr S.K. Roongta, Chairman of SAIL, during a meeting with the Finance Minister, Mr P. Chidambaram, in the Capital on Tuesday.

Our Bureau

New Delhi, Nov. 11 The Finance Minister, Mr P. Chidambaram, is understood to have once again told cash rich central public sector enterprises (CPSEs) to stop inviting bids from banks for parking their surplus funds.

Some of them have been seeking higher rates instead of the card rates. The Minister has asked them to stop this practice and stick only to card rates. This was stated by a Finance Ministry official here on Tuesday. The Finance Ministry had in January issued instructions to discontinue the practice of inviting competitive bids for bulk deposits. The purpose was to stop undesirable competition among banks to prevent arbitrary hikes in deposit rates. It was felt that banks were unable to reduce the lending rates due to the higher average cost of funds mobilised by them through the process of bidding.

Mr Chidambaram had in August said that CPSEs appear to be violating government departmental guidelines on placement of funds with banks.

At today’s meeting with the chief executives of CPSEs, Mr Chidambaram is also understood to have sought CPSEs compliance with the Ministry’s directive requiring them to park at least 60 per cent of their surplus cash with public sector banks.

“The Minister reiterated the Government’s instructions that 60 per cent be kept with PSU banks and no bids to be invited. He again sought full compliance with those instructions,” a CPSE official who attended the meeting said.

The Oil and Natural Gas Corporation (ONGC) Chairman, Mr R.S. Sharma, said that the state-run oil producer would lose between Rs 300 crore and Rs 400 crore each year if competitive bids were not invited and only card rates were adopted.

ONGC has about Rs 23,000 crore of cash surplus, 60 per cent of which would now necessarily have to be deposited with public sector and state-run banks. ONGC and NTPC are among the blue chip CPSEs that were earlier inviting bids for parking surplus funds.

“Most banks don’t even have a published card rate. We were told that we should not look at a few billion rupees in national interest. The Government is doing everything it can to tackle the current economic turmoil,” Mr Sharma told reporters after the meeting.

The meeting was attended, among others, by the GAIL Chairman, Mr U.D. Choubey; the SAIL Chairman, Mr S.K. Roongta, and senior officials of the petroleum, power and finance ministries.