The Finance Ministry has asked public sector banks (PSBs) not to accept bulk deposits beyond 15 per cent of total deposits to improve asset-liability management.

“Ten per cent is the bulk deposit above the card rate and 5 per cent is the CDs (certificate of deposit). With an overall cap of 15 per cent banks have flexibility,” the Department of Financial Services Secretary, Mr D K Mittal, said on the sidelines of FIEO meet here.

A circular in this regard has been issued by the Ministry to the banks recently.

“It has a huge risk to us as a banking system. I don’t want to comment on that,” he said when asked for the response of the banks on that.

However, bankers are of view that putting a ceiling on the bulk deposits would reduce the flexibility to cut retail fixed deposit rates in a declining rate cycle. This would mean pressure on NIMs (net interest margin) of public sector banks.

According to some statistics, State Bank of India, Allahabad Bank and Indian Bank have bulk deposits lower than 15 per cent of their total deposits.

However, Canara Bank has bulk deposit of 43 per cent, followed by OBC at 28 per cent of the total deposits as of March 2012.

Terming non-performing assets (NPAs) in the banking system as a “cause of concern”, Mittal said, it is a global phenomenon and it is not restricted to India.

“NPA does not mean that assets have been closed. They only mean that assets have some stress on that and they are not able to pay debt as per the schedule. It means it is not operational,” he added.

Talking about certain engineering project export to Iran, Mr Mittal said, “the line of credit which is to be given by Government of India to Iran...that’s an issue which needs to be resolved. We will resolve it out. It will help certain projects exports but it has to be read in line with the sanction issue”.

On export credit, the Secretary said, the government is fully supportive of promoting exports.

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