PSUs told to give business to banks on nomination

PSUs told to give business to banks on nomination): In a surprise move, the Finance Ministry has asked public sector companies to stop inviting competitive bids from banks for parking their surplus funds and directed them to give such business to state-run banks on nomination basis. 

The directive would mean that the PSUs would lose out on getting the best returns on their surplus cash because the nominated bank may even dish out below sub-prime rates as they would be guaranteed of the business irrespective of the rates they offer, industry sources said. 

With banks like State Bank of India losing out on PSU business due to aggressive competition, the Finance Ministry has stepped in to direct PSUs like ONGC to stop calling for competitive interest rate offers and park at least 60 per cent of their surplus cash with state-run banks. 

Sources said the Oil and Natural Gas Corp (ONGC) is the first to resist the directive, saying it may lose Rs 400 crore annually on interest income. 

ONGC, which has cash surplus of about Rs 25,000 crores, at present asks banks on its panel to quote interest rates they would offer for short-term deposits. The card rates of banks published on their websites are not applicable for bulk deposits for which banks quote the rates on demand. 

Prevailing card rates would be about 200 basis points lower than the rates obtained by ONGC through competitive bidding, sources said adding giving business on nomination basis breeds malpractices and favoritism. 

But for competitive quotes, ONGC has no other method of knowing the best rates available, the official said.