The bank blames RBI for not cutting down interest rates. It is absurd
and amounts to passing on the buck to RBI for bank's own failure in
managing the balance sheet.The admission that bank is not able to
mobilise adequate deposits at low rate of interest is a major
reason for high cost of funds. Further, keeping high level of NPAs is another reason for bank's
failure to reduce the cost of funds. Depending on borrowed funds at high cost to do banking business and
maintaining high NPAs without disciplining the willful defaulters will naturally add to the cost of funds and bank
cannot blame RBI for that. It is unfortunate that bank is taking shelter blaming RBI for its miserable failure in Asset Liability
Management. The point
that bank is paying more on some deposits than what it fetches on
advances is a serious issue and these advances and deposits need to be
investigated. Unless and until there are some under cuttings to favor the favored borrowers such a
thing cannot happen. The NIM of the bank is also not comparable with its
peers only indicates that there is some serious deficiency some where
in the management of assets and liabilities.The move of the bank to reduce bulk deposit is appreciable
and it will automatically bring down the cost of deposits. The answers given by the
Chairman in his interview with Business line are not very convincing to justify its comparatively low NIM,
high NPAs, high cost of deposits and over all position of the bank.Reserve Bank being a monetary authority of the Country has a different agenda and the policies pursued by it also factor in the banks' profitability, cost of funds, interest rates et al. The banks fail RBI in transmitting its monetary policies in letter and spirit is an issue to be seriously debated by the banks in India.
Dr.T.V.Gopalakrishnan
(This comment in a slightly modified manner appeared in Business Line dated 1/7/13 in response to Canara Bank's CMD's remark that Interest Rates cannot be reduced as the cost of funds is very high )
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