The Hindu Business Line : ‘Monetary policy will have marginal impact on PSBs’

New Delhi, Aug. 1 The Finance Minister, Mr P. Chidambaram, on Wednesday said that the Reserve Bank of India’s latest monetary policy measures will have “marginal impact” on public sector banks (PSBs) and that their balance sheets are “healthy enough” to absorb this marginal impact.

“Net impact of these two measures — hike in CRR by 50 basis points and removal of Rs 3,000 crore cap on reverse repo — will indeed be felt on the net interest margins of banks. If suppose another Rs 15,000 crore is put through reverse repo window and Rs 15,000 crore is sucked out of the system though CRR hike, net impact may be about 0.03 per cent on the NIM. In my view, it is possible for PSBs to absorb this small hit on their balance sheets,” Mr Chidambaram told reporters after his meeting with the chief executives of PSBs here today.

He highlighted that the banking system has to bear this as part of exercise to suck in liquidity and help fight inflation.

NPAs at historical lows

On net non-performing assets (NPA), Mr Chidambaram said that NPAs are at historical lows today. “This year also the movement will be towards reducing NPAs further. The record of banks in reducing NPAs in the last three years has been the most impressive in any three years period. Net NPAs are coming down every year. If you want me to make a prediction, net NPA as a percentage will come down further this year,” he said.

Priority sector lending

The meeting also saw discussions on stepping up of lending to minorities under priority sector. The Finance Minister made it clear to PSB chiefs that efforts be made for stepping up priority sector lending to minorities from the present level of 9 per cent to 15 per cent over a period of 3 years.

Mr Chidambaram also urged all PSBs to offer the facility of Web-based online requests for education loans by students. He also wanted them to take insurance policy on the students going in for education loans.

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