The Union Finance Minister Palaniappan Chidambaram will be reviewing the investment portfolio of major banks and the banking industry in general at a bankers' meeting this week.
The issue was not on the original agenda of the meet. This assumes significance as advance tax for the current quarter end forms a major part of the tax revenue of the government.
Banks have been expressing their concern over the impact of uncertain interest rates on their investment portfolios and overall profit.
According to bankers, the current pattern of the bank investments and the extent of interest rate impact are also important as much of the government borrowing programme has been kept for the second half of the financial year.
Usually, a major part of the borrowing is accommodated in the first half of the fiscal whereas the second half is relaxed to afford corporate borrowings.
However this year, the third and fourth quarters are likely to see the government and corporates competing for credit, a banker said.
The other issues to be discussed at the meeting is progressive lending to the small and medium sector enterprises and infrastructure credit.
An overall assessment of the demand helps the government phase out its borrowing programme so that rising interest rates do not drastically impact its loan cost.
The other thrust areas for the ministry are review of agricultural credit for the year 2004-05 and priority sector lending target for the banks.
The ministry has also called for views on fine-tuning the Securitisation Act.
It is believed to be considering reinstating the requirement for a borrower depositing a portion of the borrowed funds to the bank before a dispute between a bank and a borrower can be taken up at the appellate level (and not at the debt recovery tribunal level as earlier).
It is also thinking of reducing the amount to be deposited from 75 per cent to 25-30 per cent in case of assets transferred to asset reconstruction companies, at the appellate level.
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