FinMin pressures banks, targets up

With just about three months left for the financial year 2011-12 to draw to a close, the finance ministry has asked public sector banks (PSUs) to revise their business targets upward for the current financial year, as the economy shows clear signs of slowdown, a government source familiar with the development said.

With just about three months left for the financial year 2011-12 to draw to a close, the finance ministry has asked public sector banks (PSUs) to revise their business targets upward for the current financial year, as the economy shows clear signs of slowdown, a government source familiar with the development said.

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An executive with a public sector bank said that while the government has decided to infuse capital in the banks, it has asked them to improve their performance especially in key areas such as savings and deposits, reduction in non performing assets among other things.

“Government banks may have to revise their targets upward and the finance ministry is keeping a close watch on their performances,” a bank chief told Hindustan Times on condition of anonymity.

In October, rating agency Moody’s had downgraded its outlook towards the State Bank of India — the largest lender of India. Later in November, the rating agency downgraded its outlook for the Indian banking industry, which has witnessed a surge in the level of bad assets.

The government has decided to infuse Rs 20,000 crore into various banks including the State Bank of India by the end of March 31, 2012. The capital support is aimed at strengthening the tier I capital of the banks. As per the regulatory requirements, banks are required to maintain a minimum of 8% tier-I capital, which broadly refers to shareholder equity.

The finance ministry, meanwhile, has decided to go through the finances and performance of each public sector bank.