• PAGE ONE
• INDEX
• HOME

Banks agree to give UTI loans at sub-PLR

Sarbajeet K. Sen

NEW DELHI, July 13

PUBLIC sector banks have indicated their willingness to provide a soft loan to the Unit Trust of India (UTI) at interest rates below their Prime Lending Rates (PLR) to support the package under preparation for the bail-out of the troubled US-64 scheme. T he loans would be provided against the pledge of securities held by the trust.

This view of the PSU banks emerged at an early morning meeting of the top brass of the country's financial sector here today which was hurriedly convened to evolve a consensus to support the bail-out package.

All heads of banks and FIs had already gathered in the Capital for the scheduled meeting during the day with the Finance Minister, Mr Yashwant Sinha.

Top bankers present at the meeting said that the UTI officials were told that the loans from banks has to be on a purely commercial basis. ``The (UTI) will have to come to us with a proper proposal on the extent of funds required, the duration of the req uirement and how they propose to repay. We could not give our assent then and there since we also have our board from which we would have to seek clearance,'' the chairman of a bank told Business Line.

Bankers lamented that UTI refused to divulge any details of its plans at the meeting while seeking assistance.

It was also agreed that once the UTI comes up with its firm proposal one bank would be chosen to negotiate the terms and conditions for the loan, which will be later apportioned among the rest. ``UTI will not have to negotiate with each bank. That will m ake the process cumbersome,'' bankers said.

Moreover, the banks told UTI officials that they might also have to seek RBI's approval for such an exposure. ``We do not know the RBI's mind on the issue since they were not represented at the meeting,'' a bank chief said.

Among those present at the meeting were officials of the UTI, including acting Chairman, Mr K.G. Vassal, and senior officials of the Ministry of Finance.

Financial sector representatives present at the meeting were the LIC Chairman, Mr G.N. Bajpai, the IDBI Chairman, Mr S.K. Chakravarty, the Indian Banks' Association (IBA) Chairman, Mr S.S. Kohli, and the heads of a dozen-odd profitable Government-owned b anks.

With support from the financial sector likely to be the core of the package, today's meeting was also meant to ensure the success of the package the trust places before the Ministry of Finance. UTI's Board of Trustee would be meeting on Saturday to final ise their package for US-64.

``There is absolutely no problem in extending support to the UTI since the banking system at present has enough liquidity to support the UTI at this juncture. If all of the banks step in along with the FIs the pressure on each one of us would be very lit tle,'' they said.

Pic.: The Finance Minister, Mr Yashwant Sinha, being welcomed by the chiefs of public sector banks at a meeting in the Capital on Friday.

Picture by Kamal Narang