Finance minister Yashwant Sinha has called a meeting of chief executives of all public sector banks on July 13. The meeting is expected to take stock of the poor offtake of non-food credit in the current fiscal.
The meeting is also expected to focus on the successful implementation of the voluntary retirement scheme (VRS) in the state-run banks. "The exact agenda for the meet has not yet been decided. The finance minister traditionally meets bank chiefs after the finalisation of their balancesheets," said a source.
The ministry had held a meeting with select bankers on this issue a few weeks back. This time around, chiefs of all banks are likely to attend.
More From This Section
Non-food credit, which is a barometer of the economy, has steadily declined from a peak of Rs 4,90,296 crore as on April 6, 2001, to Rs 4,66,962 crore as on June 1 -- recording a fall of Rs 23,334 crore.
"The credit appetite of Indian corporates has come down drastically in sync with the global downturn. Manufacturers are simply not investing as demand for goods is down. Despite the low interest rates, they aren't seeking bank credit as they do not want to be saddled with unsold inventory," said a banker.
He pointed out that even if the Reserve Bank cuts the bank rate in response to a possible cut in the federal funds rate by the US Fed, it will not help much in improving the credit offtake.
"Even if the bank lures corporates with cheap loans they will not fall for the bait," said another banker.
The government will have to increase spending on infrastructure projects and also involve banks, financial institutions and the IDFC so that useful economic activity is kick-started, felt members of the banking community.