Central public sector enterprises should stop inviting competitive bids from banks for parking their surplus funds as it results in undesirable competition and arbitrary hike in deposit rates, Finance Ministry has said.
The central public sector enterprises (CPSEs), according to the ministry, should park their surplus funds with banks with whom they have regular business.
“This has been noticed that CPSEs and other central government entities are still inviting bids from banks for redeploying their surplus funds,” an official told PTI.
The surplus cash available with about 20 CPSEs is around Rs 1.2 lakh crore and is mostly deposited in banks.
Inviting bids for bulk deposits lead to undesirable competition and arbitrary hike in deposit rates. CPSEs should go for card rate and place their bulk deposits with banks with which they have regular course of business, he added.
According to the DPE guidelines issued in 2008, public sector banks (PSBs) may consider uniform card rates for bulk deposits for different maturities at least up to one year across public sector banks, in order to bring about a level-playing field.
Besides, the PSBs were directed to publish their rate cards for bulk deposits of Rs 1 crore and above.
Competitive bidding ensures that human discretion is eliminated and favouritism avoided, officials said.
The Department of Financial Services has written to the the Department of Public Enterprises asking it to advise administrative ministries/departments to instruct PSUs to discontinue the practice of inviting competitive bids for bulk deposits.
To stimulate the country’s economy, the government has been working on a plan to invest surplus funds available with CPSEs.