RBI measures to hit bank profitabiity: Chidambaram

New Delhi, Aug 1: Finance Minister P Chidambaram today said banks would take a marginal hit as a result of the measures announced in the credit policy to suck out liqudity and gave a clear impression that deposit rates were on hold.

''The two measures announced yesterday by the RBI relating to a 50 bps hike in CRR and lifting the cap of Rs 3,000 crores on reverse repo would affect the Net Interest Income (NII) of the banks. But the banks having a strong balance sheet are in a position to take this small hit. This is the price they should be willing to pay to reduce liquidity in the system and keep inflation under check,'' Mr Chidambaram told newspersons here.

The Finance Minister was briefing the media on the outcome of the meeting he had earlier with the CEOs and CMDs of Public Sector Banks (PSBs).

Mr Chidambaram said most banks have already reduced their deposit rates by 50 bps, that is from nine per cent to 8.5 per cent.

''The impresson I gathered from the review meeting is that they will maintain at this level,'' he said.

Mr Chidambaram said during the review it came out quite clearly that the Public Sector Banks were doing well on all parametres and their balance sheet was strong. This can be measured in terms of total deposits, net advances, net profits, NPAs, Net Interest Income or priority sector lending.

He said the net NPAs of the banking industry have been coming down and exuded confidence that they would further reduce by March, 2008.

The Gross NPAs which stood at Rs 51,538 crores on March 31, 2004, came down to Rs 38,830 crores as on March 31, 2007.

The net NPAs came down from Rs 18,860 crores on March 31, 2007, declined to Rs 15,877 crores as on March 31,2007.

In percentage terms, Mr Chidambaram said the GNPA fell from 7.8 per cent as on March 31, 2004, to 2.65 per cent as on March 31, 2007.

The NNPA figure in this regard fell from three per cent as on March 31, 2004, to 1.05 per cent as on March 31, 2007.

Mr Chidambaram said the lending to the real estate sector has come down and the PSBs were rebalancing of their portolfios. This process will go on, he said.

UNI