Thursday, June 4, 2015

Banks fail to pass on the rate cut

The reluctance to pass on the rate cut is due to 1) Presence of high level of NPAs in banks and the loss on account of these NPAs has to be made good by good borrowers and they have to be charged very high rate of interest.2) Lack of professionalism in running the banks ' operations and blindly charging the good borrowers to loot them. and make them also NPAs over a period 3) The management of assets and liabilities is non professional and the greed to maintain the NIM at a high level 4)The raising of deposits and lendings are on mechanical lines and no efforts are there to reduce banks borrowings which are costly 5) The awareness of the objectives of monetary policy and fiscal policy does not percolate down below the top Executives and this affects the transmission mechanism adversely. Even many of the Board Members are not fully aware of the rationale behind monetary policy objectives is a reality.6) The good borrowers have not resisted on the high rate of interest charged to them because of the enhanced cost of funds of banks thanks to the presence of high npas.Only goodie goodie talks cannot bring the desired results. Action wiith close monitoring and accountability for lapses only can bring in some results.

Dr.T.V.Gopalakrishnan  

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