This refers to your editorial “More freedom for cash” (Business Line, April 22). If at all banks face any liquidity crunch, it is of their own making and the RBI cannot be expected to come to their rescue. Banks in India face a liquidity crunch because of poor mobilisation of deposits thanks to poor customer service, high inflation, and reluctance to cash in on financial inclusion as a business opportunity. The way banks function now, with 78 per cent CD ratio when there is not much of demand for fresh credit, is indicative of a serious deficiency in asset-liability management. The NPA deposit ratio needs to be analysed in detail. The banking system has been having liquidity problem for quite some time and the solution for that cannot be relaxing the regulatory measures of the RBI.
T.V.Gopalakrishnan (HBL)
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