Punjab National Bank (PNB) signed a MoU with IL&FS Cluster Development Initiative; with this the bank will be actively involving with financing of manufacturing activities. Under this agreement bank will be providing finance for industrial infrastructure projects in the country.
However the growth in the manufacturing sector has dipped to 3% in March 2008 as compared to a 16% increase a year ago. Meanwhile bank has ruled out revising deposit rates upwards in the immediate future, triggered by concerns on rising inflation.
According to statement released by the bank, the bank’s SME portfolio was at Rs 18,198 crore. There is no margin money requirement for loans up to Rs 2 lakh under SME advances. The bank is giving loans up to Rs 50 lakh to micro and small enterprises without third-party collateral security under the credit guarantee scheme.
Punjab National Bank chairman KC Chakrabarty pointed out that under the MoU, the bank will be financing the various industrial infrastructure projects covering various manufacturing sectors. These projects include common infrastructure facilities like effluent treatment plants, hazardous waste disposal, water supply, green field industrial parks, up gradation of existing industrial estates, quality control labs, design centers etc.
He told bank will be allocating an estimated Rs 2,500 crore for such projects. These projects are expected to open up around 1,00,000 jobs over the next five years. Besides financing the common facilities or industrial park infrastructure, the bank will also be financing the various SME units coming up in these industrial parks for their various credit needs.
The term loans for fixed assets will also be provided, apart from the working capital loans for their operational needs. Bank will be taking up all the financial responsibility of the various industrial units. About 45% of the total contribution to manufacturing comes from small and medium units. The cluster development initiative of IL&FS is a group company of IL&FS and has been created to meet the various needs of the industrial clusters.
Under the MoU, the company will be responsible for sourcing of the projects, project structuring, project development, engineering & procurement, project management and supervision, due diligence and project monitoring. Although bank deposits are getting eroded with rising inflation, Punjab National Bank on Tuesday said that there is no immediate plan to increase deposit rates.
Recently the country’s largest bank, SBI, had raised deposit rates effective this month. “Inflation is higher. There would be pressure on interest rates. At present, there is no plan to increase deposit rates,” Mr Chakrabarty said. Position on interest rates appear to be stable, he said, in fact the interest rates are still higher than the inflation and there is incentive for depositors.
By the end of the week May 24, inflation stood at 8.24%, making earnings from one-year deposits to be negative. The return on fixed deposits having tenure with less than one year, earn a rate of less than 7%. However some pressure is showing up on the margin because of increase in cash reserve ratio (CRR), the percentage of deposits which commercial banks have to keep with the Reserve Bank of India. It is being expected that there are less chances of another hike in CRR.
In April, RBI had hiked CRR by 0.75% to suck out around Rs 27,000 crore from the economy to cool down inflation. Earlier this week, ICICI Bank CEO KV Kamath stated liquidity is good and there is no signs of any rate hike. “As of now, there is no signaling of interest rate hike,” he had said.
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