........While RBI is signalling a hike in interest rates, the finance ministry has said it is willing to give banks more capital provided they used this to lend more in certain areas and at lower interest rates. If the finance ministry gives banks Rs 100 of additional capital, banks can lend up to Rs 1,000 given the current capital adequacy norms. And since banks will now have to raise less funds in the market, either through CASA or bulk deposits, their cost of funds will fall and can be passed on to consumers. ............
The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
1 comment:
Let us read the observation “While RBI is signalling a hike in interest rates, the finance ministry has said it is willing to give banks more capital provided they used this to lend more in certain areas and at lower interest rates. If the finance ministry gives banks R100 of additional capital, banks can lend up to R1,000 given the current capital adequacy norms.” in this edit again. GOI today is using its ‘ownership rights’ on public sector banks even beyond the level IMF used to do through conditionalities while extending ‘aid’ to poor nations decades ago. Traditional priority sector which has not lost relevance in the development context is being ignored and finance ministry is asking public sector banks to lend at lower interest rates for consumption and luxury. As regards capital adequacy norms and infusion of additional capital, perhaps a relook at SLR norms (which provide captive sources at lower than market rate funds to government), accumulation of bad loans because of GOI policies and need for a level playing field for PSBs may be necessary to assess costs and benefits for the institutions.
Post a Comment