FinMin working to make PSU banks more accountable

In keeping with the statements made by Finance Minister P. Chidambaram a week back, the Finance Ministry is working on making the PSU banks more accountable. The ministry plans to set targets for the PSU banks on some financial and qualitative parameters. Those banks which will enter into an agreement with the ministry to fulfil these parameters will be also be given more autonomy.

However, banking sources pointed out that these parameters may vary from bank to bank depending on the size of their operation. The financial parameters that would be the basis to judge the performance of the PSU banks are likely to include net profit, growth in business (both deposit and advances), NPAs, car, net interest margin, intermediation cost, cost to income ratio, earnings per share and return on average assets and networth. The government may also insist on sticking to the priority sector lending targets, including credit to farm and SSI sectors.

The ministry plans to set qualitative targets that include compliance with Basel-II norms, improvement in risk management, use of technology, HRD and career planning, new product innovation, special efforts in reaching out to poor. A draft proposal to this effect was circulated when the FM met bankers on June 3.

Banks have to clearly state the actual figures of the previous fiscal and the target for next fiscal. Once the pact is signed, banks would have to mandatorily attain the targets. On more autonomy to the PSU banks, banking sourcs said the ministry has conveyed that there would be flexibility in various spheres of operations.