More rate cuts likely from banks soon, says Jaitley | Business Standard News

More rate cuts likely from banks soon, says Jaitley | Business Standard News

My VIEW:

It
is comforting to find that the focus is shifting from forcing RBI to ‘cut’
rates again and again, there is someone responsible acknowledging the need to
ensure that the effect of cuts already done reaches the beneficiary down the
line, namely the borrower who deploys the credit availed for productive
purposes.
It
is intriguing that all the sermons from the Finance Minister are addressed to
Public Sector Banks which are burdened with heavy social sector
responsibilities which add to their stressed assets and draw on their resources
due to the huge number of accounts(both deposits and credit) they have to
service. Last week only HDFC Bank(a major private sector bank) MD said, “…I
turned digital, I got into semi-urban and rural areas, I got the brand, systems
and people…” Such claims make one wonder, why the share of private sector banks
in banking business is not growing fast and why the FM is speaking exclusively
to public sector banks when it comes to social sector or financial inclusion
issues.
Back
on rate cut, it has to be clearly understood that base rate cut by RBI does not
directly result in reduced cost of funds for banks. That is why the deposit
rates get affected first and long after, when pressure mounts, depending on
market scenario, a part of the benefit is shared with borrowers by reducing
lending rates.
It
is necessary for all the stakeholders to reconcile to the reality that whether
in public sector or in private sector the resources belong to the country and
its people and government and organisations have to manage them with care.


M G Warrier, Mumbai  

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