FM, PSU bankers to review results

Finance Minister P Chidambaram is slated to meet bankers on November 18, to review performance of PSU banks and discuss ways of augmenting their capital by Rs 60,000 crore (Rs 600 billion) in the next 5-6 years.

With a higher target in mind, the minister is expected to take stock of PSU banks lending to infrastructure, farm and SME sectors.

Bankers, who are preparing for the November meeting, told PTI that the ministry may take up issues relating to performance of PSU banks on various parameters like business (loans and deposits growth), profit, income, non-performing assets and capital adequacy ratio.

Consolidation in the banking sector may also raised in the meeting, sources said. Though Chidambaram has initiated the consultation on consolidation, a banker said mergers and acquisitions among PSU banks may take some time.

Some of the financially strong banks are ready but M&As have to consider various issues like geographical and business synergies, manpower problems and technology integration, a banker said.

Mergers and acquisitions could be imminent for some of the financially weak banks who are not in a position to tap the market for raising additional capital neither will their balance sheet allow them to meet RBI's prudential guidelines and Basel-II norms from March 2007.

Chidambaram had recently stated that PSU banks may require about Rs 60,000 crore additional capital in the next 5-6 years to sustain growth in business, meet Basel-II norms and upgrading IT platform to become globally competitive.