Karnataka Bank chief seeks parity on interest subvension loans
15 Jul 2009
P Jayarama Bhat, who took obver as managing director and chief executive of Mangalore-based Karnataka Bank Ltd on Tuesday, has urged the finance ministry to include private banks in the interest subvention scheme. At present, only public sector banks receive subsidy under the scheme for disbursals made towards crop loans, with the centre making good the difference in interest rates charged.
Bhat told reporters that the Reserve Bank of India stipulates same priority sector lending target of 18 per cent for both private and public sector banks. "Agriculture loans advanced by us at nine per cent are naturally unattractive to farmers," he said. "It becomes difficult to meet targets in such a scenario," he added.
Public sector banks can afford to lend at as little as 6.0 per cent, with the government making up the difference.
The bank's poor performance in priority sector lending had come up for discussion at the recently held district level consultative meeting on banking development. Bhat said private sector banks, including Karnataka Bank, have represented their case to the finance ministry and the RBI through the Indian Banks Association. "We are hopeful that our pleas on this issue are heard soon," he added.
Listing his focus areas, Bhat said lending to small and medium enterprises, enhancing credit deposit ratio, and meeting current account saving account targets are his priority. The bank has restructured 1,506 SME accounts in the last 15 months, amounting to Rs799 crore, he said.
Bhat said Karnataka bank would be cautious about lending to real estate business given the present slump and will finance only customers of long standing.
Bhat's appointment marks a shift from the conventional chairman-driven bank to an executive-driven bank, following RBI directions based on the Ganguly commission recommendations that all the private sector banks vest executive powers in the managing director and chief executive.
