Targets of PSU banks not acceptable: FM

Finance minister P Chidambaram came down heavily on public sector banks for projecting stagnation or drop in deposit mobilisation, credit and profit targets for 2005-06 - a fiscal expected to show high growth, and said such targets were not acceptable.

"Public sector banks have been consistently outperformed by the new private sector banks in deposit mobilisation. Some frontline public sector banks have projected deposit growth in 2005-06 that is lower than that of 2004-05. Some banks have also projected deceleration in advances," Chidambaram said while speaking at the annual general meeting of Indian Banks' Association (IBA).

"If the rate of growth of the economy in 2005-06 is maintained at 7%, it is difficult to understand how business projections by public sector banks, especially desposits and advances, can show deceleration," the finance minister said.

Stating that the management of non-performing assets (NPAs) remained the foremost challenge for banks, he said: "We will keep a close watch on the manner in which NPA reduction is taking place, and insist that cash recoveries should more than offset fresh write-offs," he said.

The government would retain 51% equity stake in public sector banks, Chidambaram said, and added that banks that have reached the limit of 51% have to identify new forms of capital to strengthen the capital base.

"The policy of the UPA government is to retain these banks as public sector banks. However, some new form of capital would have to be identified in order to strengthen the captial base of banks that have reached the limit of 51%," Chidambaram said.