Five crore commemorative coins of Rs 5 denomination, unveiled recently to celebrate 150 years of taxation, will be minted for public distribution soon. The coins, released by Finance Minister Pranab Mukherjee on February 26, will be put in public domain and will be a collector's item. These will have no extra price, a senior Finance Ministry official said. The special coin was unveiled along with a coin in the denomination of Rs 150 on the occasion of completion of 150 years of taxation and also of the Income Tax department from 1860 to 2010. The Rs 5 coin, made of an alloy of Silver, Copper, Nickel and Zinc, has an international design with 'Satyameva Jayate' and 'India' on the front and a portrait of 'Chanakya and lotus with honeybee' on the reverse. The Rs 150 coins will also be minted in the same fashion but only about 200 coins will be minted and would be available on request at a special price, he said. Earlier only 100 coins of Rs 5 were planned to be issued but the Central Board of Direct Taxes (CBDT) and the Income Tax department impressed upon the government the need to mint more such coins in public interest, he said.
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.
Saturday, April 2, 2011
Procedural irregularities hold up SBI chief’s appointment
The formal appointment of the State Bank of India (SBI) chairman has been delayed due to procedural irregularities in selection of the candidate proposed by the finance ministry. The irregularities have been highlighted by Cabinet Secretary K M Chandrasekhar. He has written to the finance ministry, questioning Pratip Chaudhury’s selection for the top job at the country’s largest lender. A senior government official told Business Standard . that Hemant Contractor’s name was on the top of the list during the selection of managing directors (MDs). However, for the chairman’s post, Chaudhury’s name was sent to the Cabinet Secretariat, he said. He added the cabinet secretary had asked the ministry to explain the reason for this change. The official said usually the names proposed by the finance ministry for top posts at public sector banks were cleared. But this was an unusual situation, he said. “A final decision is likely to be taken after the finance ministry’s explanation,” he said. The panel to select the SBI chairman interviewed four deputy MDs – Hemant Contractor, Pratip Chaudhury, Diwakar Gupta and A Krishna Kumar. The government has handed over the interim charge of the bank to Managing Director R Sridharan. O P Bhatt retired from the post yesterday after a five-year tenure. Sridharan, whose is to retire four months from now, is likely to continue on the post till his term ends. Sridharan was appointed as an MD in December 2008 and was looking after SBI’s associate banks and subsidiaries. There have earlier instances of SBI being headed by an acting chairman. In 2006, when A K Purwar retired, one of the MDs, T S Bhattacharya, was given the interim charge.
Friday, April 1, 2011
SBH to extend financial aid to 1,102 villages
Following the Reserve Bank of India (RBI) directions, the State Bank of Hyderabad (SBH) said it would extend financial inclusion across 1,102 villages with above 2000 population spread across 36 districts in Andhra Pradesh, Maharashtra, Karnataka and Gujarat. hese districts together cover a rural population of about 42.69 lakh. Financial inclusion will provide banking products such as savings, loans and services like remittance and insurance in areas where there are no banking services. It caters to low income groups and offers services at an affordable cost. According to SBH, the proposed financial inclusion will be implemented in two phases. While the first phase will cover about 300 villages by March 2011, the remaining villages will be covered in the next fiscal. SBH said it has already commenced enrolment and opening of savings accounts in 261 villages covering AP and Karnataka. On Tuesday, the bank distributed biometric cards to customers in few villages in Mahaboobnagar district. As part of the project, the bank has launched overdraft products to meet the financial requirements of beneficiaries across all villages. Besides opening a savings account, customers can also opt for variable recurring deposit, term deposits, overdraft in recurring deposits and term deposits in loan category general purpose credit card will also be available to all villagers.
FSDC not meant to be a super regulator'
The Union finance ministry has again taken pains to emphasize that the newly formed Financial Stability and Development Council (FSDC) won’t be a ‘super regulator’. “That is out of the question,” a key ministry official told Business Standard. FSDC, he noted, was not a statutory body. The commission, to be chaired by the finance minister, is meant as a broad “regulatory collegium”. There has been renewed discussion recently, as at the time it was formed, on whether it would be grow into the role of a regulator of the existing regulators, something the Reserve Bank of India, for one, has been wary about. “The issue is whether there could be a super regulator to oversee and co-ordinate the other regulators,” Financial Sector Legislative Reforms Commission chairman B N Srikrishna had told Business Standard. The FSDC was constituted through a notification by the finance ministry, not by an act of Parliament. Its aims include inter-regulatory coordination and maintaining stability in the system, among other things. Its creation came as a turf war occurred between the regulators of the capital markets and the insurance sector on the policing of unit-linked insurance products. The RBI had said FSDC should not assume the role of a super regulator, but confine itself to financial literacy and financial inclusion, which are also the aims of the council. It had also expressed reservations over a proposed joint mechanism under the ministry to sort out a turf war between regulators. Later, the RBI governor was appointed as the vice-chairman of the joint mechanism, chaired by the finance minister. However, no such post was given to the RBI governor in FSDC, but he was made head of a sub-committee on the coordination of inter-regulators. Experts say RBI’s opposition to FSDC as a super regulator was probably because its prime role at the High Level Coordination Committee (HLCC) that had regulated the financial sector. RBI feared those would be diminished once FSDC came into being, as the latter was chaired by the finance minister. The sub-committee, chaired by RBI within FSDC had replaced HLCC.
Cheque payments to get costlier
NEW DELHI: Making payments through cheques may become a costlier affair from tomorrow, as RBI has allowed banks to levy higher service charges for their clearing, especially of high-value and outstation cheques. As per a RBI circular coming into effect from April 1, 2011, banks would be free to fix service charges on speed clearing of cheques of value above Rs 1 lakh. At present, RBI does not allow banks to charge more than Rs 150 per cheque for speed clearing of cheques worth over Rs 1 lakh, while there are no charges for value up to Rs 1 lakh. However, speed clearing of cheques with value up to Rs 1 lakh would continue to remain exempt of any service charges. Speed clearing refers to processing of outstation cheques electronically and without movement of cheques from the presentation centre (city where the cheque is presented) to drawee centre (city where the cheque is payable). For normal local clearing also, drawee bank can charge up to Rs 1.50 per cheque from tomorrow, as against Re 1 at present. For local clearing through cheque truncation system, which works electronically by processing the scanned image of the cheque, drawee bank can levy a service charge of Re 1 from tomorrow, up from 50 paise at present. Besides, RBI has also given a free hand to the banks to decide on the service charge on outstation cheques of over Rs one lakh, as against a maximum limit of Rs 150 per cheque allowed currently. However, RBI has decided to lower the service charge for outstation cheques up to Rs 5,000, by allowing a levy of Rs 25, as against Rs 50 currently. The outstation cheques between Rs 5,000 and Rs 10,000 would continue to attract a fee of Rs 50, while those between Rs 10,000 and Rs 1 lakh would also continue to be levied a charge of Rs 100. While fixing service charges not mandated herein, banks have been told to get approval from their boards for service charge structure. "Charges fixed should be reasonable and computed on a cost-plus-basis and not as an arbitrary percentage of the value of the instrument. The service charges-structure should not be open ended and should clearly specify the maximum charges that would be levied on customers including charges if any, payable to other banks," RBI has told the banks. The service charges by banks should be inclusive of all charges (postal, courier, handling, etc.) other than service tax, RBI said.
RBI misses deadline to issue banking licence guideline
The Reserve Bank has missed the deadline to issue the much-awaited guidelines for giving new banking licences. "I am sure we are not issuing it (licence) today," RBI Deputy Governor K C Chakrabarty said. In the Budget 2011-12, Finance Minister Pranab Mukherjee had said the RBI plans to issue guidelines for the grant of new banking licences before the close of this financial year. Recently, Department of Economic Affairs Secretary R Gopalan had said that RBI will come up with the guidelines by the end of this month. In the last Budget, it was announced that the Reserve Bank of India would consider giving traditional banking licences to private sector players, he had said. Following the announcement made by the Finance Minister, the Reserve Bank had brought out a discussion paper in August, 2010, on giving out new banking licences to business houses and non-banking finance companies, besides regulations for the same to foster greater competition. The RBI also sought to know "whether industrial and business houses could be allowed to promote banks." Furthermore, it sought stakeholders' views on whether NBFCs should be allowed to convert into or promote banks. The RBI has received comments on its discussion paper from all stakeholders. Various entities like Reliance Capital, IndiaBulls, Religare, IL&FS, IDFC, IFCI and Aditya Birla Financial Services are reported to be mulling an entry into the banking space. At present, India has 26 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, 4 local area banks, 1,721 urban cooperative banks, 31 state cooperative banks and 371 district central cooperative banks.
SBI opens 25,000th ATM and 9,000th semi-urban branch
Mumbai, Mar 31 (PTI) The State Bank today opened its 25,000th ATM and the 9,000th semi-urban branch, and said it will add 10,000 ATMs annually for the next three years. The outgoing Chairman Om Prakash Bhatt said SBI had plans to deploy 10,000 ATMs every year over the next three years. He inaugurated both these facilities at the SBI board room here through video conferencing, which was attended by the entire board of the bank, including RBI Deputy Governor Shyamala Gopinath. While the 25,000th ATM is located at south Mumbai''s Girgaon, the 9,000th rural, semi-urban (Rusu) branch is at Sundargarh in Orissa''s Bhubaneswar Circle. Speaking at the occasion, Gopinath said though ATM was the most innovative product in the banking space, there was a need for an optimal ratio of technology and physical branches as rural customers still preferred physical branches. Of the 13,500 plus branches, as much as 67 per cent are located in rural and semi-urban areas, Bhatt said, adding the State Bank Group has 25,000 ATMs, out of which SBI alone has 20,087. In the last two years alone, the SBI Group has put up as many as 13,596 ATMs. SBI''s ATM network processes over 7.5 million transactions a day, disbursing nearly Rs 1,500 crore in cash. The State Bank has issued over 90 million debit cards and enjoys a market share of over 38 percent. From June 2006 to March 2011, more than 3,400 branches were opened by SBI alone, Bhatt said. The State Bank Group now has 18,181 branches. In FY11, SBI opened 1,040 branches, including the merged branches of State Bank of Indore.
Thursday, March 31, 2011
Meet on urban coop banking held
Srinagar, March 29: The fifth meeting of the state level task force on Urban Co-operative Banks was held at RBI Jammu office under the Chairmanship of Arnab Roy, Regional Director for Jammu and Kashmir (Chairman of TAFCUB). The meeting was attended by Co-Chairman M Abbas Dar, IAS, Registrar, Co-operative Societies, Jammu and Kashmir, K.K.Saraf, General Manager, UBD, RBI, CO., Mumbai, H S Khitaulia, Deputy General Manager, UBD , RBI, Jammu. Chief Executive Officers of Citizen Cooperative Bank Ltd. Jammu, Devika Urban Cooperative Bank Ltd, Udhampur, Urban Co-operative Bank Ltd Islamabad and Kashmir Mercantile Co-operative Bank Ltd, Sopore also attended the meeting. The meeting reviewed the performance of the Urban Co-operative Banks in the Urban Banking Sector in the State. Opening of new branches by UCBs, imparting training to the staff of UCBs by RBI, complaints against CCBL and elections in CCBL along with latest policy developments were the major issues discussed in the meeting.
RBI Decides Not to Change NWMA Limits for States
Mumbai (ABC Live): the Reserve Bank of India has decided not to change the State-wise limits of Normal Ways and Means Advances for the year 2011-12. The aggregate Normal WMA limit for the State Governments inclusive of the Government of Jammu & Kashmir and the Union Territory of Puducherry is placed at Rs.10,240 crore for the year 2011-12 and other terms and conditions of the Scheme would remain unchanged.
RBI ticks off banks for rate reset violations
The Reserve Bank of India (RBI) has come down heavily on some banks which are violating agreements with borrowers while increasing interest rates. RBI has observed that some banks raise interest rates, particularly on term loans, every time the benchmark prime lending rate (BPLR) is changed. This is despite the loan contract clearly mentioning that banks can increase rates only after a gap of a certain number of years. This is known as the reset clause in bank parlance. In case of term loans, the common practice is to prescribe a specific reset period, which can be two years, three years or five years. This ensures that a particular rate, once fixed, is maintained for a particular period. Benchmark lending rates, both BPLR and base rate, can change anytime depending on the interest rate environment. Addressing a complaint from a company last week, the Appellate Authority of RBI rejected a public sector bank’s appeal and upheld the order passed by the banking ombudsman. The appellate authority had asked the bank to retain the rates fixed prior to the reset period. RBI has also ordered a scrutiny of all term loan accounts of the bank as it feels that some borrowers may be ‘suffering in silence’. Asking the Kolkata-based bank to rectify the rate, RBI said in a letter that the appellate authority had directed the bank to review the rate urgently and confirm that the rate was not changed during each reset period in cases of term loans sanctioned since April 1, 2006. “In cases where a discrepancy is observed, the same should be rectified immediately and the excess amount refunded to the borrower,” RBI said.
BOI falters at doorstep
LOHARDAGA: The doorstep service of Bank of India (BOI), being the lead bank in the district, has flopped at Doba, the village adopted by Reserve Bank of India (RBI) under its model village banking programme. Reserve Bank Governor D.Subbarao had visited the village on December 15 to announce the scheme in a bankers' show attended by many top bankers from the country. The BOI's doorstep banking service, launched in the function, was showcased by a business correspondent by inserting smart cards into a mobile machine before Subbarao. Three months later, the service is yet to start in the village. More than 1,200 villagers had opened their accounts to avail themselves of the service but no one, barring the one introduced to the RBI governor during the December 15 function, has been provided with the smart card which is to be used for activation of account through the machine connected to Internet. Reena Mariyana Lakra, the business correspondent, said she had the machine at home which could not be operated as none of the account holders had been given smart cards. "Some days back I was given some smart cards which were taken back by the block unit of the BOI. I had distributed some of the cards which I had to return to the bank," she said. She added that out of over 1,200 account holders only 150 had been provided passbooks. "This delay, however, is going against the RBI's motto of making Doba a 100 per cent banking aware village," said Punam Minz, an anganwari sevika at Doba. District lead bank manager John Kacchap said doorstep banking service was dead since the accounts had not been uploaded on Internet. He, however, claimed that pass books had been distributed. "I talked to the BOI Kuru branch officials, zonal office in Ranchi and the service implementing agency "Integra" in this connection and we are trying to start the service within a week's time," he added.
RBI never understood teaser loans: Bhatt
Outgoing State Bank of India (SBI) chairman Om Prakash Bhatt continued his defiance of the central bank on the teaser loan front saying "the Reserve Bank of India (RBI) never understood our special home loan product. "Obviously, they (RBI) have not understood our product (the special home loan product)," Bhatt, who is superannuating on Thursday from SBI after a five-year stint as chairman and a four-decade-old association, told reporters at the bank headquarters. Reiterating that RBI's stance that SBI's special home loans are similar to the sub-prime loans lent in the US in the run-up to the 2008 global financial meltdown, Bhatt said this view is beyond logic as his offering is sold to those who are "absolutely credit-worthy." However, he was quick to add that this is not a defiant stance with regard to the regulator but this is the view point of a bank that is the industry leader with a quarter of the entire banking business under its fold. "Being the industry thought-leader and market leader, it is the duty of SBI to articulate our views to the regulator. This has to be done in the interest of intellectual honesty and public discourse," he said. However, Bhatt was quick to add that "but if they still insist that this cannot be continued and is against its norms, then we will comply...that does not mean that we don't have a view point on this. Also, I would like to place it on record that so far, all through the five years of my tenure as the chairman, SBI has been 100 per cent compliant with all the RBI regulations."
Apex bank pep pill for states
Mumbai, March 30: The Reserve Bank of India (RBI) today said states should explore ways to raise non-tax revenue and review tariffs in highly subsidised sectors such as power and irrigation. Releasing its study on State Finances 2010-11, the central bank said the budgetary position of states during the year showed a turnaround from the expansionary fiscal stance in the previous two years. According to the study, an improvement in state finances is expected with a majority of the states budgeting either a revenue surplus or a lower deficit in 2010-11 (budgeted estimate) compared with 2009-10 (revised estimate). At a consolidated level, the revenue deficit is placed lower at 0.3 per cent of GDP (gross domestic product) during 2010-11 against 0.7 per cent in 2009-10 (revised estimate). “With an improvement in the consolidated revenue account of states, the gross fiscal deficit as a ratio to GDP (GFD-GDP) is estimated to decline to 2.5 per cent in 2010-11 (BE) from 3.3 per cent in 2009-10 (RE),’’ the study said. The central bank said there was an improvement in key fiscal indicators across states and a majority of them expected higher tax buoyancy. However, non-tax revenue is budgeted to decline in 18 states. The paper said factors such as the implementation of the goods and services tax (GST), the pace of economic recovery, the states’ own efforts towards mobilising non-tax revenues and rationalisation of expenditure will be some of the factors that could impact fiscal consolidation. However, to make progress towards fiscal consolidation, the study said, states should amend their fiscal responsibility and budget management acts and work out a fiscal reform path. “States also need to review their tariff policies, especially those relating to the power and irrigation sectors,’’ the study said. On GST, the apex bank said given the uncertain revenue implications of its introduction, states should undertake a careful management of their finances in the next few years. However, the introduction of GST can enhance the competitiveness of Indian industry and trade. The strengthening of state finance commissions is essential to ensure allocation of adequate resources to local bodies, the report added.
RBI allows co-op banks to collect account-payee cheques from credit co-operatives
The Reserve Bank of India (RBI) has authorised co-operative banks to collect account-payee cheques from co-operative credit societies provided the payees are constituents of the credit cooperatives. This is being done to ease the difficulties faced by co-operative credit societies that are not even sub-members of clearing houses, RBI said in a release today. Members of such co-operative credit societies who do not have bank accounts face difficulties in collection of account payee cheques drawn in their name. Cooperative banks may consider collecting account payee cheques drawn for an amount not exceeding Rs50,000 to the account of their customers who are co-operative credit societies, if the payees of such cheques are the constituents of such co-operative credit societies, RBI clarified today. While collecting the cheques, banks should, however, obtain a clear undertaking in writing from the co-operative credit societies concerned that, upon realistion, the proceeds of the cheques will be credited only to the account of the member of the co-operative credit society who is the payee named in the cheque. "This will be subject to the fulfillment of the requirements of the provisions of Negotiable Instruments Act, 1881, including Section 131 thereof," RBI noted. The collecting banks and the cooperatives should, however, strictly follow KYC (Know Your Customer) norms and enter into an agreement that the KYC documents in respect of the society's customers are preserved in the society's records and are available to the bank for scrutiny. This should not, in any way, affect the rights of the true owner of the cheque in any manner and banks should establish that they acted in good faith and without negligence while collecting the cheque in question, RBI added.
Who is to blame for inflation?
Mumbai: After two weeks, India’s food inflation is back again in double digits. Weekly fluctuations in food prices may not be always be very material but as last month’s WPI numbers show inflation has become generalized and is no longer restricted just to food articles. Doubtlessly, this will put the spotlight on the limited success of the Reserve Bank of India (RBI) in combating inflation for well over a year. Subbarao’s reluctance to deviate from a gradualist approach to tackling inflation led the Wall Street Journal to wonder aloud after the January policy review if he is a hawk, dove or chicken. This is indeed a dramatic shift in perception about RBI from the heydays of 2009, when India and its central bank were the toast of international policy makers, as a 23 March Economic Times article by MC Govardhana Rangan points out. Rangan argues that Subbarao’s policy stance has a Greenspan-like touch in its predictability. Comparisons with Greenspan would probably be the last thing any central banker would want to hear! But is it fair to judge monetary policy without taking into account the role of fiscal policy? In a recent post on iMFdirect, celebrated macro-economist David Romer writes that one of the key points of reasonable agreement among economists after the crisis is: The impact of a change in fiscal policy is extremely dependent on whether monetary policy is able to respond, and on how it responds if it can. We would like to invert the argument to point out that the success of monetary policy depends as much on its own stance as it does on fiscal policy. The fiscal deficit target for next year at 4.6% is by all counts commendable and if realized would be a big step to combat inflation. However, many doubt if the target is actually achievable as Jehangir Aziz puts it eloquently here. If oil prices stay at current levels, Pranabda would probably need Harry Potter’s wand to achieve that target. Now consider growth: a target of 9% is not exactly anti-inflationary. Supply-side bottlenecks may be partly responsible for inflation but faster growth without easing those constraints will cause only more, not less inflation. And if budget projections are to be believed, capital expenditure by the government is going to come down from 13.4% of total expenditure to 12.7%. It is like a car with a fraying engine that is trying to speed faster. So why does the government not acknowledge this and aim for a moderation in growth till it is able to ramp up investments? Kaushik Basu’s argument in this year’s Economic Survey was: In designing inflation control measures it is important to be aware that sudden, sharp policy induced contractions in demand can cause unemployment to rise. He goes on to argue that the trade-off between inflation and employment escapes public awareness as employment statistics come with long intervals unlike inflation numbers. Basu’s point that a hard landing would cause unemployment and misery is true but it actually makes the case for a moderation in growth to avoid a hard landing later. Besides, one can argue that the cost of unemployment has to be balanced against the cost of inflation to evaluate whether on balance the welfare loss of employment is still greater. Secondly, high inflation often leads to what is termed as ‘demand destruction’, exactly what oil prices are threatening to do to the global recovery. If high inflation erodes purchasing power and could slow down consumer demand as some surveys indicate, then inflation rather than policy tightening becomes a bigger threat to growth and employment. Basu also argues that prices tend to be higher in economies where growth is higher. Empirical evidence for such a simplistic relation (which economists term the Balassa-Samuelson effect) has been hard to come by. Casual empiricism also suggests otherwise — we need not even look beyond our immediate neighbourhood to find such evidence. Justin Yifu Lin, chief economist at the World Bank cites China’s example in a recent speech to illustrate how high growth is attainable with low inflation. A fiscal stimulus aimed at increasing railroads, port facilities and other infrastructure allowed China to raise its annual growth rate to 10.9% in 2003-10 from 9.6% in 1979-2002. They achieved it without raising inflation beyond 5% unlike earlier decades when 2-digit growth rate was always accompanied by a 2-digit inflation rate, said Lin. Basu’s contentions may be debatable but the elaborate justification of high inflation could perhaps be an indication that the fiscal stance would be tolerant of high inflation. One reason for this could be that though politically inflation is a problem for the government, financially it is not. As long as nominal GDP is going strong, tax revenues would grow. More importantly, the government being a net borrower would benefit from inflation, at least in the medium term. Not for nothing do they call inflation a tax! However, as the government’s stance is known only once a year unlike RBI’s policy reviews that have a six-weekly frequency, fiscal policy’s contribution to inflation might continue to escape public awareness, slanting discourse on the subject.
RBI BARS NBFC SFROM INVESTING IN PARTNERSHIP FIRMS
The Reserve Bank of India on Wednesday barred non-banking finance companies from investing in partnership firms. The ban on contributing capital to partnership firm has been clamped due to risks involved in associated with these firms, RBI said. It, however, did not elaborate on the nature of the risks.
Bhatt Against Freeing Up of Savings Rate
Echoing ex-governor of RBI YV Reddy, SBI chief says freeing up of deposits will defeat the purpose of financial inclusion - The State Bank of India’s outgoing chairman Om Prakash Bhatt joined former RBI governor YV Reddy, credited with saving the Indian financial system, in speaking against freeing up of savings deposit rates as it may defeat the very goal of financial inclusion and expose the poor to be cheated by banks. “It has done well for a large number of depositors who cannot have recurring deposits,” Mr Bhatt, whose bank controls a fifth of the deposits, said at his farewell press conference. “There are four million people in this country who earn less than . 50 a day and save about . 30 or . 40 a day and they can save the money in the form of fixed deposits or recurring deposits,” he said. Some of the government organisations may also be at the receiving end, if rates are liberalised. “There are large numbers of government organisations who cannot keep money in fixed deposits and so if they keep it in savings deposits they get some money out of it,” he said. RBI governor D Subbarao has set up a committee to study the consequences of freeing up of savings rate which is mandated at 3.5% a year now. All interest rates except rates on savings accounts are free now. Mr Bhatt is not alone in raising concerns over freeing up of deposit rates. Former RBI governor YV Reddy recently said in an interview it may be detrimental to the interests of a large number of people. “Many of the common people don’t have time to apply their mind and shift money from savings to deposits, etc. So, for heaven’s sake, give one banking instrument, one bank account where the man knows that this is the interest rate, this is the facility. This is required. I would even say, particularly, it is required for women in India whose money should be safe from their husbands,” Mr Reddy had said. Banks, which are keen on lowering their cost of funds, are lobbying with the central bank for freeing up of savings rates. Those with lower balances could be short changed for wealthy clients who anyway are paid higher rates for funds in the name of bulk deposits. Freeing up could lead to volatility. A bank may pay 1% or less for those account holders who have small deposits and 5% if they are willing to keep . 50,000 in a savings account. This in turn will impact small depositors. Even public sector banks which carry-out government programmes would get in to a disadvantage. “Deregulation of rates would be detrimental for PSU banks which control 72% of the banking market. We are the bank which does most of the real sector activity of the country in any case,” said Mr Bhatt. “So if we are weakened by the higher cost of deposits, our ability to do the kind of work will be affected,” he added.
Subscribe to:
Posts (Atom)