PSU banks should be made to bid for surplus funds with the state-owned firms, rather than getting them through a common rate of interest, the Department of Public Enterprises (DPE) has said.  In a communication to the Finance Ministry, the DPE has written to the Finance Ministry arguing that these banks must compete among themselves for deposits of the PSU firms, which had a surplus of about Rs 2.50 lakh crore at the end of March, 2010.
At present, the PSUs can choose bank of their choice but the interest rate offered would be the same, as the banks are not allowed to compete, denying the advantage to the PSUs. A minimum of 60 per cent of the investible funds of the PSUs should be parked with the state-owned banks.

Even 10-20 basis points change in the interest rates offered would make a big difference to the earnings of the large depositors like PSUs.

“We have written to the Finance Ministry. The decision that there should not be competition among banks was taken at a time when there was an economic downturn and we did not want our own banks competing with each other,” DPE Secretary Bhaskar Chatterjee told PTI.

He said now that the downturn is behind the country, there should be competition among the banks for deposits.

“These companies have huge amounts and why they should not get the best returns for money they invest,” he asked.

The current one-year rate for bulk deposits among public sector banks is 9 per cent across the board for the PSUs’ deposits.

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