A V Rajwade:: Monetary transmission, base rates and ALM | Business Standard Column

A V Rajwade:: Monetary transmission, base rates and ALM | Business Standard Column



My VIEW:
One need to ponder over the concluding paragraph. I quote:

"High interest rates can have two opposite consequences for the banking system: on the one hand, they would help increase the net interest income while, on the other, they also tend to worsen the quality of assets, increasing the level of non-performing assets. No wonder, capital intensive industry and infrastructure projects seem to have a disproportionate share in NPAs."

My response:

October 8, 2015
Base rates basics
This refers to A V Rajwade’s column “Monetary transmission, base rates and ALM” (THE OTHER SIDE, October 8). The article helps us to look around and search for reasons other than the (earlier) adamant approach of RBI to managing base rates. Bad Asset Liability Management (ALM), high NPAs, inefficiency infused by bad HR policies and government interference in conduct of banking business contribute their share in banks’ inability to reduce interest rates on loans.
It is common knowledge that net interest margins(NIM) in India are much higher than the interest rates in some countries. Till RBI obliged by reducing the base rates by 50 basis points on September 29, blame for high cost of credit was put squarely on Monetary Policy. Earlier also stakeholders and analysts were aware that banks are not lending out of funds provided by RBI at Bank Rate. The twist in the story has come when Finance Ministry announced its intention to bring down the return on small savings and PPF balances on the same day RBI announced reduction in base rates.
In industry, if cost of production has to come down, efficiency has to be improved and resources have to be managed well. Banks, which are dependent on savers for their resources, cannot go on reducing deposit rates. Banks will have to prune down their costs, reduce NPAs and where there are policy compulsions to lend, those who force the banks to lend disregarding the norms of prudent banking will have to compensate for the losses.

M G Warrier, Mumbai
M G Warrier

Comments

Post a Comment

Popular posts from this blog

NAVAGRAHA STOTRAM

NAVAGRAHA STOTRAM* According to astrology, the positions of the nine planets in the twelve constellations of the zodiac and their movements are considered to be quite significant. The nine planets ‘Navagraha’ affect every aspect of human life. They play an important role in the activities, physical and mental health and life of any individual. The unfavorable positioning of any of these planets can be the cause of problems, bad health, and stagnation for many people. However, there is a solution to avoid the ill effects of the position and movement of the ‘Navagraha’ in our lives. Navagraha mantras (or stotram) are simple mantras which work as powerful healing tools to reduce the negative effects of any of the nine planets. These mantras are Hindu holy hymn addressing the nine planets. Benefits Of Navagraha Stotram And The Way to Practice The Navagraha Stotram is written b y Rishi Vyasa and is considered to be the peace mantra for the nine planets. They are powerful m
Read more

THE SUNSET OF THE CENTURY

*SUNSET OF THE CENTURY: Rabindranath Tagore THE LAST SUN OF THE CENTURY SETS AMIDST THE BLOOD-RED COLOURS OF THE WEST AND THE WHIRLWIND OF HATRED. THE NAKED PASSION OF SELF-LOVE OF NATIONS IN ITS DRUNKEN DELIRIUM OF GREED IS DANCING TO THE CLASH OF STEEL AND THE HOWLING VERSES OF VENGEANCE. THE HUNGRY SELF OF THE NATION SHALL BURST IN A VIOLENCE OF FURY FROM ITS OWNSHAMELESS FEEDING FOR IT HAS MADE THE WORLDITS FOOD, AND LICKING IT, CRUNCHING IT AND SWALLOWING IT IN BIG MORSELS, IT SWELLS AND SWELLS TILL IN THE MIDST OF ITS UNHOLY FEAST DESCENDS THE SUDDEN HEAVEN PIERCING ITS HEART OF GROSSNESS…   *Note: “The Sunset of the Century”, translated by the poet, from Naivedya; The English Writings of   Rabindranathtagore, Volume II,Delhi 1996, page 466. Quoted in his article ‘Critiquing nationalism’ by K Satchidanandan (Frontline, November 14, 2014). The article takes you to a much broader spectrum. HAPPY READING(READ MORE STAN
Read more

The King of Ragas: Sankarabharanam

                       The King of Ragas                      --------------------------     Long ago  serpents were put to lot of hardships.They  were afraid of other animals. They had to seek refuge in the hermitage of sage Saraba.The sage was a true devotee of Lord Shiva.He used to pray Shiva with melodious songs. As he sang a particular raga the snakes were much inspired and they began to dance,. Slowly the serpents became friendly with the sage. They brought water in their mouths for the pooja.They secreted  a special fluid in which the flowers got stuck to their bodies.The sage was much astonished by the service of the snakes.As the sarpas became very close to the sage ,they requested him to help having Darsan of Lord Siva. As requested by the sage Shiva appeared in the form of  a  Kapalika and stayed in the ashram.The music and dance of the snakes continued. The snakes rendered service to the kapalika as they considered him  a Shiva bhakta.Shiva was much pleased with t
Read more