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K.R.Srivats

MR P. CHIDAMBARAM

New Delhi April 16 Public sector banks' move to raise bulk deposits at higher interest rates in March may come under Government scanner.

A number of PSBs had gone in for such a strategy to tide over their fund crunch in the last quarter of the fiscal 2007-08.

The Finance Minister, Mr P. Chidambaram, is likely to take up the `bulk deposits' matter during his meeting with Chief Executives of PSBs here on April 19, official sources said.

Indications are that the impact on profitability due to this move would be discussed. Bulk deposits had to a large extent helped the banking industry in accelerating its deposit growth during the fourth quarter of 2006-07.

Although mobilisation of bulk deposits at high rates was not an industry-wide occurrence, tight liquidity conditions in that month had prompted certain PSBs to source bulk deposits from cash rich corporates and other avenues at high interest rates.

Sources said that some banks had contracted bulk deposits at even 11-12 per cent for one-year maturity. Indications are that the banks which had seen substantial increase in the share of bulk deposits in their overall deposits would come up for special attention.

The Finance Minister is also likely to discuss the issue of facilitating enhanced lending to minorities, including opening of more branches in the 104 minority dominated districts of the country.

The other major issues that may be taken up on April 19 meeting include lending by PSBs to "commercial real estate" sector and systemically important NBFCs, review of credit exposure to personal market segment, enhanced capital requirements of PSBs and rebalancing of portfolio post monetary-policy of January 31, 2007.

India Infrastructure Finance Company is also likely to make a presentation on infrastructure financing at the meeting, sources said.

More Stories on : Fixed Deposits | Public Sector Banks

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