Business

FM confident of close to 8% GDP growth

NEW DELHI: Even as the Prime Minister’s Economic Advisory Council (PMEAC) projected a slowdown in GDP growth to 7.7 per cent for the current fiscal, Finance Minister P. Chidambaram on Wednesday expressed confidence that the economy would grow at close to eight per cent.

Briefing newspersons after his meeting with chairpersons of public sector banks (PSBs) here, Mr. Chidambaram said: “If the Prime Minister’s Economic Advisory Council pegs it [economic growth] at 7.7 per cent, I can confidently say it will be close to eight per cent.”

During the course of his meeting with PSB chiefs, Mr. Chidambaram charged public sector undertakings (PSUs) of violating the Department of Public Enterprises (DPE) norms that 60 per cent of their surplus funds should be parked with the state-owned banks.

“It appears to me that public sector companies are violating the guidelines issued to them by DPE. They are continuing to call for bids (for bulk deposits) and they are not observing the guidelines that 60 per cent of public sector companies’ money must be kept with public sector banks,” he said.

Concerned over the rise in cost of deposits of banks due to such competitive bidding by PSUs such as ONGC, NTPC and others, Mr. Chidambaram asked them to refrain from such practice. “I intend to take up that [matter] with DPE. I intend to take up the issue with the Minister concerned,” he said.

The Finance Minister pointed out that the bankers told him that credit would grow at a brisk pace and the productive sectors would not be starved of credit. Although there was a bit of a slowdown in demand for personal loans, the overwhelming view was that there had been no slowdown in the overall demand for credit. As for the real estate sector, banks had imposed certain restraint. But even then, the demand for credit in this sector also continued to be high.

Mr. Chidambaram pointed out that many banks had hiked their benchmark lending rates by 0.75-1 percentage point. However, all existing home loans and all new home loans up to Rs. 30 lakh as also the existing automobile and educational loans were being spared from the rate hike.

The profitability of banks, Mr Chidambaram said, had declined to some extent during the first quarter this fiscal owing to a fall in returns from treasury operations.

However, he was hopeful some of the losses in treasury operations would be recovered if the market sentiment improved.

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