Friday, July 20, 2012

No Loan growth target for Public Sector Banks

Public sector banks will not have to focus on their top line growth, as there will be no targets for them to meet credit and deposit growth for the current financial year. Instead, the finance ministry has asked the government-owned banks to focus on increasing efficiency and bringing down non-performing assets. Banks will now have targets on lowering the number of loss-making branches and cutting bad loans of regional rural banks.

At the beginning of every financial year, the government-owned banks indicate their targets to the finance ministry in statements of intent. The statements consist of parameters such as business growth, low-cost deposit growth, net NPAs, net profit, etc. Banks state their targets in each of the parameters in the financial year. Their performances are reviewed at the end of the financial year.

Now, the finance ministry wants banks to focus on increasing their profitability and improving the asset quality. As a result, some new parameters would come in. The finance ministry is holding meetings with each PSB bank chairman to finalise the targets. 

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