The government is overhauling the annual targets for public sector banks from this month, to focus on size that has long encouraged banks to inflate their loans and deposits at the year-end to hit growth objectives.
- Overhauling the bloated and often sluggish state banks is critical for the government, which needs to rekindle credit growth to reboot an economy that remains slow to recover, even if official statistics have it growing faster than China.
- It will help to put a stop to widespread “window dressing” of state banks’ financial accounts at the end of the fiscal year.
- Window dressing” practices inflate the numbers on the last day of March, the date on which performance is measured. Analysts expect new targets to use average and quarterly measurements, rather than one day.
- Cracking down window dressing would help generate realistic projections before signing annual agreements with the government.