Lambasting central public sector enterprises for inviting bids for bulk deposits from state-run banks, Finance Minister P Chidambaram said he will take up the issue with the minister of heavy industries and public enterprises.
The department of public enterprises had issued instructions in January that at least 60 per cent of the funds under the control of central public sector enterprises (CPSE) should be placed with public sector banks and the bidding system should be discontinued to avoid undesirable competition. The measure is aimed at making available low-cost funds to public sector banks to enable them to lend at lower interest rates.
“CPSEs are violating guidelines issued by the department of public enterprises. I intend to take up the issue with the department and the minister,” Chidambaram said after meeting public sector bank chiefs.
Public sector companies continue to invite bids from commercial banks, Chidambaram said, adding, “This is an unhealthy practice.” He said steps will be taken to instruct the companies again to adhere to the instructions. About 12 public sector banks have raised around Rs 26,600 crore between May and July this year from government-owned entities by paying between one and four per cent higher than the card rates offered to retail depositors.
In recent weeks, banks have hiked lending rates citing pressure on margins. The Centre has been asking these banks to focus on low-cost deposits.