Finmin, PSU banks set to sign targets deal

The finance ministry will set targets for PSU banks on 11 financial parameters and six qualitative aspects in an agreement that banks would have to sign this month end.

"It (the targets) won't be the same for all. Each bank will have individual targets, which have to be fulfilled at the end of the fiscal," a finance ministry official said today.

The financial parameters that would be the basis to judge the performance of PSU banks include net profit, growth in business (both deposit and advances), non-performing assets, capital adequacy ratio, net interest margin, intermediation cost, cost-to-income ratio, earnings per share, return on average assets and net worth.

The government will also insist on sticking to the priority sector lending targets including credit to farm and SSI sectors.

The ministry has also set six qualitative targets that include compliance with Basel-II norms, improvement in risk management, use of technology, HRD and career planning, product innovation, and special efforts in reaching out to the poor.

A draft of the MoU was circulated when finance minister P Chidambaram met bankers on June 3. "There may be some modifications. The agreements may be in the form of statement of intention instead of an MoU," an official said, adding it had to be signed on June 30.

According to the draft agreement, banks have to clearly state the actual figures of the previous fiscal and the targets for the next fiscal.