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Sinha to meet bank, FI chiefs on Friday -- To discuss banks' market exposure, slowdown

Sarbajeet K. Sen

NEW DELHI, July 11

CAPITAL market exposure of public sector banks would come under close scrutiny of the Finance Minister, Mr Yashwant Sinha, during his meeting with the Chief Executives of the Government-owned banks on Friday.

A 10-point agenda prepared by the Banking Division of the Ministry of Finance has included discussion on banks' investment in the capital market as part of the formal itinerary.

In a hectic day on Friday, the Finance Minister has also scheduled a separate late evening meeting with the Chief Executives of all major financial institutions.

The head of banks and FIs are expecting that the Finance Minister would spare considerable time during the meetings to discuss the slowdown in the economy and the role that the lending institutions can play in supplementing the efforts of the Government to buck the trend.

The issue of economic slowdown is likely to come up for detailed discussions during the deliberations on the trend in credit off-take which figures prominently on the agenda for both the meetings.

Top bankers said that the inclusion of the capital market exposure on the agenda assumes importance in view of the revised guidelines on banks' investment in the capital market which was issued by the Reserve Bank of India (RBI) in May in the aftermath o f the Madhavpura Co-operative Bank scam.

They pointed out that though the stock market investments of banks had come up for discussion during the last meeting with Mr Sinha in April, it was not part of the formal agenda of the meeting.

While discussion on non-performing assets (NPAs) figures prominently on the agenda for both the meetings, the scrutiny would be more detailed for the FIs where the Finance Ministry has said that other than the overall NPA levels, bad debts at the sectora l level in the backdrop of the overall exposure of the institutions to each sector would also be discussed.

The other common issue in both the lists includes the review of the financial performance of the lending institutions. ``Other than the review of the performance for 2000-01, the discussions are likely to touch upon the requirement of greater transparenc y in the balance sheets and the need to shift over to the US GAAP standards,'' the Chairman of a bank told Business Line.

The remaining items on the agenda for the meeting with bank chiefs include progress of implementation of Kisan Credit Card Scheme (KCC), implementation of education loan scheme, progress by banks in implementing the one-time settlement scheme (OTS), Lok Adalat, manning of bank branches in the post-voluntary retirement scheme (VRS) days and the status of computerisation in banks.

The FIs' meeting would also discuss the role of development financial institutions (DFIs) in the context of financial sector reforms and flow of credit to the small-scale sector.