Finance Minister P. Chidambaram may come down heavily on public sector bank chiefs for not passing on to borrowers the benefits of RBI policy rate cuts.
The controversial issue of monetary transmission is likely to come up for special attention when Chidambaram meets them in the Capital on July 3.
This meeting was originally slated for June 26, but now stands postponed to July 3 at the behest of Department of Financial Services, it is learnt.
There are annual general meetings (AGMs) of certain big banks clashing with the earlier date of June 26, sources in the banking industry said.
Chidambaram had recently said that he would take up with bankers the issue of benefits of policy rate cuts not being passed on to borrowers.
Although the RBI had reduced the repo rate by 130 basis points since January 2012, the banks had on their part cut their lending rates only by 30 basis points during this period. Repo rate is the rate at which RBI lends money to banks.
“This issue (weak monetary transmission) is very much on the agenda of the meeting. We are gearing up with our defence”, said a public sector bank chief who did not want to be identified.
The central bank had this year cut the repo rate by 75 basis points cumulatively in three different policy review meetings.
It had kept the repo rates unchanged at 7.25 percent at its recent June 17 policy review meeting.
Performance review
The July 3 meeting will also see the Finance Minister review the performance of public sector banks in 2012-13, their lending to the infrastructure sector and their efforts on the direct benefit transfer front.
Financial inclusion and non-performing assets (NPA) situation will also be high on the agenda of the meeting, it is learnt.
The RBI’s recent move to rationalise the risk weightage for banks’ lending to housing sector will most likely be discussed. This move could spur investments in the housing sector.
The other issue that may come up for discussion is the 215 stalled projects involving an investment of Rs 7-lakh crore. The banks are understood to have disbursed about Rs 53,000 crore to these projects.
The Government has recently taken many measures to expedite clearances for these projects.
It has also set up a special cell to regularly meet with stakeholders and ensure speedy clearances.