The Hindu : Business : PSU banks to be told to raise Rs. 60,000 crore

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Tuesday, Oct 25, 2005

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PSU banks to be told to raise Rs. 60,000 crore

Special Correspondent

Chidambaram wants banks to upgrade technology

PNB NETWORKED: The Union Finance Minister, P. Chidambaram, inaugurating the Punjab National Bank Network Operation Centre in New Delhi on Monday. S. C. Gupta, Chairman and Managing Director of PNB, looks on. — Photo: Sandeep Saxena

NEW DELHI: The public sector banks (PSBs) will be told to raise Rs. 60,000 crore to meet the credit needs in the next five-to-six years at a meeting that the Finance Minister, P. Chidambaram, is to convene with the chairpersons of PSBs next month.

Inaugurating the `Network operating centre' of Punjab National Bank (PNB) here on Monday, Mr Chidambaram said the PSBs would require an additional Rs. 8,000-9,000 crore of capital formation each year for the next five years, provided they continued to finance 30 per cent of the gross domestic product (GDP) and the economy happened to grow at the rate of seven per cent annually.

"Where are we going to raise this capital? These are the questions that I would pose to CMDs of PSU banks when I call them for the meeting after announcement of the first half results,'' he said.

Apart from raising capital, the PSBs, Mr. Chidambaram said, were required to upgrade their technology to increase efficiency and attract borrowers who had many options now to choose from.

Core banking solution

In this regard, the Minister referred to PNB's target of bringing 2,000 of its branches under core banking solution (CBS) by March next. Till date, the bank has 1,426 branches under CBS. Mr. Chidambaram regretted that some of the other PSU banks were far behind in technology upgradation and attributed it to their earlier lack of autonomy. These banks were now charting their own course, he said. Mr. Chidambaram said the Centre and the Reserve Bank of India (RBI) will take all steps necessary to contain the inflation rate at moderate levels and prop up the growth of the economy.

Speaking to newspersons on the sidelines of an award function organised by the United Nations Development Programme (UNDP) and the Rajiv Gandhi Foundation here on Monday, he said: "We will continue to watch the price line. If necessary, we will take monetary and fiscal steps [to rein in inflation]. Let us see what the RBI does tomorrow. Then we will take fiscal steps, if necessary.''

The Government and the RBI, Mr Chidambaram said, expected the rate of inflation to be around five per cent.

This was despite the increase in domestic fuel prices and its "pass through'' impact on other commodity prices. "As I have said earlier, there is bound to be some impact of fuel price hike on inflation. So, the price rise was inevitable. I think the fuel pass through impact is over,'' he said. The inflation rate inched up to 4.62 per cent during the week ended October 8 from 4.24 per cent a week earlier, mainly owing to the increase in the prices of essential food products and manufactured items.

Interest rate stability

With the inflation at moderate levels, Mr Chidambaram saw no pressure on interest rates as well. "Bankers told me that the interest rates will remain stable in the short-to-medium term,'' he said.

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