Govt wants PSU banks to make changes in sectoral exposure
Mumbai: The finance ministry says that public sector banks in which the government holds a majority stake should make changes in their exposure to various sectors and reshuffle their asset portfolios by switching from short-term to long-term assets.

A detailed note sent by the ministry to all PSU bank CEOs has directed them to "revisit sector-wise lending targets" and "make suitable modifications in lending priorities".

The ministry note also directed banks' attention to the "slope of the yield curve and the tenure buckets of bank loans".

According to the ministry, with a widening of the gap between the yield on long- term and short-term government securities, the yield curve has stiffened in the first quarter of 2006-07.

The government's view is that banks, especially those in the public sector, "have a crucial stake in maintaining the growth momentum". This is because banks' profits "depend on financing of productive investment activities which, in turn, not only depend on but also determine the growth of the economy".

The ministry note said that banks' holding of SLR securities was more than the RBI stipulated 25 per cent and hence they had "sufficient headroom" to lend.

The government's view is that, "If more funds are available to the productive sectors, there may not be a need to reprice loans to the productive sectors.
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LIC Housing plans public deposit scheme
Chennai: LIC Housing Finance is planning to come out with a public deposit scheme in the next few months basically to reduce cost of funds and improve spread.

S K Mitter, director and chief executive officer, said LIC Housing Finance sees higher margin potential in public deposit scheme. The company's cost of fund was 7.6 per cent, while the average yield was 8.8 per cent.

Mitter also said the company had set out a target to reduce gross non-performing assets to one per cent by 2008 from 3.8 per cent as on March 31, 2006. The value of gross non-performing asset was Rs508 crore. The net NPA stood at 2.12 per cent.

On the decline in net profit during Q1, he said the profit was lower because of impact of provisioning norms.
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