Bank chiefs are expected to express concerns about rising interest rates and slowdown in the economy in their forthcoming meeting with the finance minister Pranab Mukherjee. The finance minister has called a meeting with chief executive officers of state-owned banks on July 8 to review their quarterly performance. The meeting comes soon after the Reserve Bank of India
Although PSU banks' audited results may not be declared by July 8, most banks will share estimated numbers with the finance ministry. On banks' performance for June 2011, Ajay Parmar, head, institutional research at Emkay Global, said: "The biggest concern is whether banks would be able to maintain margins and take care of asset quality. Credit growth may moderate since there are signs of a slowdown. We may not see phenomenal growth in profits that we had seen in the past."
Bankers said that FM is also likely to discuss issues related to progress on financial inclusion, loans to farmers and students and recovery of bad loans. The managing committee of the Indian Bank Association, a lobby of banks' management, will meet by the end of this week to discuss the issues that could be raised with the finance minister.
"The loan book may be affected due to a slow down in the economy. Corporates may put on hold future investment due to hardening of rates in the near term and this will impact the growth in loan book," said RN Pradeep, CMD of Corporation Bank. Bankers are expected to convey this to Mr Mukherjee.
Apart from this, bankers will also make a stronger pitch on allowing them to float infrastructure bonds. As of now, banks can raise long-term bonds but investors do not get tax benefits unlike the bonds floated by financial institutions like IDFC, L&T Finance and India Infrastructure Finance Company. Bankers say more than half of funding requirements of infrastructure companies are provided by them and thus they too should be allowed to float tax saving bonds.
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