FM's Meeting PSU Banks

 

The FM's meeting PSU banks on the 15th of November 2012 to take stock of things at this juncture when the economy needs solid support from them is welcome. The FM should exhort bankers on the following items which will give a boost to the economy.1)They have to reduce the interest rate for the manufacturing sector by suitably adjusting their present NIM which is very high compared to International standards. The banks cannot expect to make huge profit at the cost of the economy.2) The Savings bank interest rate though deregulated has been kept unchanged at 4% which is nothing compared to the inflation rate prevailing at  double digits. 3) NPAs need to be tackled by being very strict with borrowers and this can be achieved only through rating of the borrowers and levying a small penalty based on their conduct of accounts. This levy over a period will be sufficient to cover the NPAs and the provisions towards NPAs which is at the cost of all other stake holders particularly the Govt and depositors can be minimised. The loss on account of NPAs needs to be assessed by each bank and this needs to be monitored by RBI and FM jointly. The write offs should be subjected to checks and balanced and this needs to be critically evaluated.  4) The cash deposit ratio needs to be considerably brought down to improve profitability.5)

 ALM needs to be intensified to bring down cost and maximise profit.6) The establishment cost  needs a close watch and wasteful expenditures  to be meticulously avoided. The IT should be put into optimum use to avoid wasteful expenditures on travels  seminars and conferences. 7) Financial inclusion should be viewed as a business opportunity and to make it a success it is better for banks to seek the assistance of social workers and other agencies engaged in different activities in towns and villages. The approach that only those sitting in HOs know everything has to be shelved and they should come down to ground level realities.

The FM should review the  customer service  and a  Ratio to assess  Customer Service   akin to CRAR should be attempted.