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PSU banks on FinMin watch after downgrade

The finance ministry has decided to go through the finances and performance of each public sector bank (PSU) with a fine toothcomb especially after global rating agency Moody’s downgraded the Indian banking industry last month.

india Updated: Dec 05, 2011 22:36 IST
Mahua Venkatesh

The finance ministry has decided to go through the finances and performance of each public sector bank (PSU) with a fine toothcomb especially after global rating agency Moody’s downgraded the Indian banking industry last month.

Senior finance ministry officials including financial services secretary DK Mittal have started attending each board meeting of the public sector banks to assess and review the audit reports and overall performance which includes the stated targets on several areas. http://www.hindustantimes.com/Images/HTEditImages/Images/06-12-buss-05.jpg

“The finance ministry has got very active in screening the performance of the public sector banks and apart from government nominated board members, other senior officials are also attending all board meetings to ensure that things are within control,” a chairman and managing director of a state-owned bank, who did not wish to be identified told HT.

In October, Moody’s had also downgraded its rating for India’s largest lender — the State Bank of India (SBI). The ratings firm blamed the pull-down to a shortage of capital in SBI to cushion bad loans or contingencies and “weakening asset quality” —implying loans that do not yield interest.

The finance ministry has indicated that all banks would get a shot in their arms to ensure that tier I capital is much above the mandatory stipulated level of 8%. “Adequate capital will be provided to all public sector banks and we want to assess the performances of banks and see what is the level of capital required by them,” a senior government official said.

Earlier, the finance minister Pranab Mukherjee said the government would take steps to ensure that all banks are recapitalised and are in a position to meet the surging credit demands expected in the future to fuel growth in the economy.

The government, meanwhile, has decided to infuse R20,000 crore into various banks, including SBI, by the end of the current fiscal.

The government has come under criticism for taking a lackadaisical approach on the State Bank of India which has been seeking help for sometime.