Cash-rich PSEs contend that the annual loss to them on account of not being allowed to invite bids for depositing their surplus cash is an estimated Rs 5,000 crore. The government, in February last year, had directed CPSEs not to invite bids for depositing their surplus.
Instead, they have to go in for bulk deposits with banks at card rates (special interest rates for such deposits), which is currently around 7%-10% for most banks.
PSEs argue that if bids are allowed, the interest rates offered would be much higher as it would lead to competition amongst banks.
“We’ve received requests from companies such as ONGC, NTPC and SAIL (for being allowed to invite bids). A review is now necessary considering the loss that state-run firms are currently bearing,” said a government official who did not wish to be named.
Source: Economic Times By Dheeraj Tiwari & Subhash Narayan Public sector cos may get to park more with pvt banks
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By ugesh sarkar, Section Finance & Investing
Posted on Wed Feb 24, 2010 at 09:38:35 PM EST
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“Earlier we used to get 1-2% above the card rate when there was a liquidity problem. Since banks do not have any such problems now, they are not so keen to get large deposits,” he said, adding that there is, therefore, no risk for them to run losses due to bidding.
The government had asked PSEs not to invite bids from banks for placing their bulk deposits. It had also directed that they park 60% of their surplus cash with public sector banks.
Public sector banks, however, feel that if the restrictions are removed it will lead to a hike in interest rates. “The current rate of interest for bulk deposits is around 7%. If bids are allowed, this will increase the cost of funds, which banks will have to pass on to the borrowers,” said a senior OBC official.
Currently there are around 15 companies, which have a cash surplus of more than Rs 10,000 crore. The move made by the government for disallowing bids had a negative impact on companies such as BSNL which had an interest income of about Rs 3,900 crore from its cash reserves, helping the company to declare a net profit of Rs 575 crore in 2008-09.
Other blue chip companies which are sitting on cash surplus include NTPC, ONGC, SAIL, BHEL, NMDC among others.
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