FM to meet PSB chiefs today

Finance minister P Chidambaram will meet chiefs of public sector banks on Friday. This is Chidambaram's second meeting with the bank chiefs. He had earlier met them in September last year in Mumbai.

The meeting will review the financial performance of banks. This becomes significant since the recent third quarter results of banks have been mixed with most of the private sector banks faring better than the public sector ones.

While there will be a review of banks' financial performance and agricultural lending, bank chiefs are gearing up to present their list of demands for the upcoming Budget and promised bank reforms.

Bank chiefs are set to demand a tax rebate on provisioning of bad loans, a uniform rate for taxing NRI deposits on a prospective basis and a clear tax system for asset reconstruction companies on par with mutual funds from the annual Budget.

"We want tax rebate for providing for bad loans. Currently, there is a complex formula for tax rebates," said officials of the Indian Banks' Association, country's premier bankers' body.

H N Sinor, chief executive of IBA, will also attend the meeting.

The tax system on NRI deposits varies from country to country, from 5 to 15 per cent, depending on various conditions.

Bank chiefs will also make a call for complete autonomy and consolidation.

In September, Chidambaram urged them to disburse loans to the agricultural sector on a priority basis. The FM also flagged off the debate on consolidation in September at the annual general meeting of the IBA.

The IBA recently formed a high level committee headed by State Bank of India chairman A K Purwar on managerial autonomy for public sector banks. There is also a big demand for fast track promotions in banks.

The autonomy package could include greater freedom to the boards of banks in terms of opening of branches, restructuring of operations including closure of loss making businesses and opening of new lines of business.

The plan may grant freedom to the boards of banks to decide on the number of general managers and executive directors, according to those involved in the exercise.

The package could also give the state-run banks more leeway to appoint senior management personnel, fix more attractive compensation structures and professionalise its boards.