RELEVANCE OF BANKS
October
26, 2015
Relevance
of banks
This refers to C R L
Narasimhan’s article “Diminishing a bank’s traditional role” (The Hindu, Financial Scene,
October 26). The article is immensely relevant in the context of the reforms in
the financial sector, now under way. The prime objective of the reforms is to
retain the health of the banking system and to ensure that (i) banking business
remains with banks regulated by RBI under Banking Regulation Act, 1949 and RBI
Act, 1934 and (ii) banks are able to live up to the role expectations in regard
to mobilising and managing deposits ensuring safety and liquidity and a
reasonable return to the savers while deploying the funds mobilised to promote
economic growth and financial inclusion.
RBI’s recent efforts to
help banks reduce their stressed assets, bring more players who are already
doing ‘banking business’ into regulatory and supervisory discipline applicable
to the existing mainstream banks and consider possible structural changes
within the banking system to infuse professionalism and efficiency should be
viewed in the above context. The changes hopefully will help banking system
work with less NIMs(presently these have reached the level of 4 per cent in the
case of some banks) which will result in reduction of interest rates on loans
without reducing rates on deposits which are already low. The success of these measures is crucial
to the retention of the savers and borrowers within the formal banking system.
M
G Warrier, Mumbai
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