"Going forward, if GDP growth slows down, there could be some impact on asset quality (of banks)," he said while addressing an event organised by the Indian Merchant Centre in collaboration with ICAI.

He further said the government is committed to adequately capitalizing the banks and help them meet the Basel III capital requirement norms. "Additional capital is required for meeting Basel III norms. However, sufficient cushion is available for the Indian banking system. The government is committed to infusing required capital in the public sector banks," he added.

The Indian economy is likely to grow by 7.6 per cent in fiscal 2012-13, up from 6.9 per cent in the current year, which is the lowest rate recorded in nearly a decade excluding the global financial crisis in 2008, Mukherjee said last month.

In his budget for fiscal 2012-13, Mukherjee provided for a capital support of Rs 15,888 crore to public sector banks and financial institutions. "The government is committed to protecting the financial health of public sector banks and financial institutions," he had said in his budget speech.

The government has already infused more than Rs 20,000 crore in 2010-11 and Rs 12,000 crore in 2011-12 in various state-owned banks to help them maintain a capital adequacy ratio of more than 8%.

High interest rates and lower economic growth has impacted the repayment capacities of borrowers, pushing up the nonperforing assets of banks to Rs 1.27 lakh crore in the first nine months of fiscal 2011-12.

Banks' bad loans stood at Rs 94,084 crore in FY2010-11, Rs 81,813 crore in FY2009-10 and Rs 68,220 crore in FY2008-09.

India’s economic growth during 2011-12 slowed down to 6.9 per cent from 8.4 per cent a year ago. The growth for the current fiscal year has been pegged at 7.6 per cent. — Reuters, PTI

Mumbai, April 7
State Bank of India, the country's top commercial lender, is increasingly confident the central bank, faced with a slowing economy and rising inflation, will this month cut the amount of cash that banks must hold as reserves.

SBI chairman Pratip Chaudhuri, who has regular contact with Reserve Bank of India policymakers, said he expects the central bank to loosen policy at its next meeting on April 17 by cutting its cash reserve ratio (CRR) by 75 basis points.

On Wednesday, Chaudhuri said he expected a cut either in the CRR — the percentage of deposits that lenders must park in cash with the central bank — or in interest rates.

According to a Reuters poll in March, 12 out of 14 analysts said they expected the RBI to reduce its key interest rate by 50 basis points to 8 percent by the end of June.

India's monetary policymakers left rates on hold in March, just days after they cut the CRR by 75 basis points to 4.75%, in a move that was bigger and earlier than markets had expected. Growth in Asia's third largest economy slowed to 6.1% in the three months to December, the weakest in almost three years, and fell just short of 7% in the fiscal that ended last month.

Headline inflation picked up for the first time in five months in February, to 6.95%, on higher food costs, though another measure of price pressures cooled, sparking market talk that a rate cut might be in the offing. — Reuters

Q: I worked at a bank (Bank A) from March 2005 to July 2008, following which I joined another bank (Bank B) where I was employed till April 2010. I also got my Provident Fund account at Bank A transferred to that of Bank B. Can I now withdraw my PF funds accumulated in these five years and will they be taxable?

— Nitin Kaushal

A: According to the explanation under Sec. 8, Part-A of the 4th Schedule of the Income Tax Act, since you have transferred your accumulated PF balance in the recognized Provident Fund maintained by your former employer to a fund maintained by your new employer, the period for which you rendered continuous service under your former employer shall be included in computing the period of holding the funds. You can withdraw this balance only if you resign from your new job before the total period of five years is over and you don't transfer it to a new fund. Otherwise, it will become payable to you only on cessation of the current new employment after five years or on retirement, whichever is earlier. The funds will be taxable if your total period of service is less than five years.

Q: I have a Public Provident Fund account in which I've been depositing Rs 1 lakh every year. Can my wife, who is a homemaker, also open a PPF account and deposit Rs 1 lakh every year? The funds will be deposited from my salary. I shall be claiming rebate under Sec. 80(C) of the Income Tax Act for Rs 1 lakh only on my account. Also, what will be the income tax liability on maturity of my wife's PPF account?

— Sanjeev Mahajan

A: You are earning over 8% taxfree interest by taking advantage of the fact that contributions to Public Provident Fund need not come out of the account holder's income chargeable to tax. This is in fact an excellent strategy. Normally, any income earned by a person from funds gifted by his or her spouse is clubbed for tax purposes in the donor spouse's hands. However, in the present case, since PPF interest is taxfree, the clubbing loses its teeth. At maturity, after the end of 15 years, the at-end balance of an account with contributions of Rs 1 lakh every year becomes around Rs 31.90 lakh if the contributions are made at the end of each fiscal and Rs 34.64 lakh if these are made during the beginning of the year. Obviously you would like to contribute at the beginning of the fiscal. The maturity proceeds would be also taxfree according to the current tax laws.

Though you’ve not posed this question, I wish to point out that Public Provident Fund has post-maturity continuation features. At every maturity, you can keep on opting to continue the account for a block period of five years and leave the corpus thus carefully built up for your retirement or for marriage, educational other needs of children. In case of any emergency you can fall back on the withdrawal facilities of PPF.