I am unable to understand why SBI chairman is putting his
entire weight on getting interest on CRR deposit or cutting short of CRR. It is
true that SBI and other banks may earn few crore of rupees as interest on CRR
fund but the same is not going to improve the bottom-line and core health of the
bank. Profit of banks is shrinking only due to rise in nonperforming assets and
rise in provisioning. Business of banks is not growing because the manpower
posted at branches are in many cases are not competent or corrupt or not
getting support from higher level. Branch head are not enthusiastic in sanction
of loan because of wrong attitude of their bosses.
Pressure on branch officials has mounted to intolerable
extent and many of them will collapse or resign or become sick if the same
torturous pressure goes on increasing. Unless and until there is rise in good quality
advances, the profit of banks may not improve.
Role of interest is insignificant in the balance sheet of
the borrower. It is absolutely wrong to presume that only by fall in interest rate
on advances and deposit, the volume of advances will increase. Rather if
deposit rates are reduced further I think people of India will not like to park
their idle fund in banks and prefer investing in gold and other avenues.
Already there is sharp fall in savings deposit in bank and the growth in deposit
is subdued because of shifting of bank deposit to landed property or mutual
fund in on increasing trend. Any further cut in deposit rate may strike at root
of survival of bank and further spoil the future of banking.
Credit growth is not satisfactory because banks are
suffering due to rise in bad debts, rise in quantum and volume of stressed
assets and large scale corruption in sanctioning of loan and advances. Health
and profitability of bank improve only when the quality of manpower improves.
Productivity of every branch and all banks will improve only when there is
adequacy of manpower in all offices and redeployment takes place honestly at
all level.
Health of bank may improve only when quality of Human
resource management improves. Sickness of bank may be cured only if right
person is promoted to top level, right persons are given promotion in right
time and the system of flattery and bribery ends completely. Frauds in
recruitment and in promotion have to be stopped and only then anyone can
imagine of real growth in business and real rise in profitability.
I am therefore of the view that instead of focusing on repo
rate cut or interest on CRR or cut in CRR bankers should focus on keeping their
manpower happy , ensure judicious promotion to real performers and creation of
an environment where real performer are motivated to work more and more .
If RBI can't cut CRR, let them pay us interest on it: SBI---Business Standard
Most analysts expect the RBI to hold rates during its mid-quarter monetary policy review on June 17
Ahead of the mid-quarter review of monetary policy tomorrow, the State Bank of India has said if the apex bank cannot reduce CRR rate, which is a must for lending rate cuts by banks, they should pay interest on cash reserves that banks park with the monetary authority.
Incidentally, most analysts expect the RBI to hold rates during its mid-quarter monetary policy review.
"If a CRR cut cannot be done due to inflation worries, let the RBI pay us interest on CRR. We will then do the transmission for sure. If the RBI pays me Rs 500 crore on interest on my CRR, I promise to transmit the entire Rs 500 crore to borrowers by reducing my base rate," SBI chairman Pratip Chaudhuri told PTI recently.
Last year he had triggered off a heated debate by calling for abolition of CRR.
He felt that CRR is "dead money" and it had led to a public spat withK C Chakrabarty, the RBI deputy governor in charge of banking services, who said that if the SBI chairman is not comfortable working under existing regulations, he should look for "some other sector".
Explaining the rationale for SBI's as well as other banks' inability to cut lending rates with minor repo rate cuts that RBI has done by 125 basis points (1.25 per cent) since the middle of the past fiscal, Chaudhuri said, "The relationship between the repurchase rate and the bank lending rate is rather weak. Bank deposits rates are guided by postal deposit rates and not by RBI rates".
Further, he said that a 25 basis points repurchase rate cut will give an additional income of merely Rs 50 crore to the SBI.
"How do I distribute it to my borrowers when my loan book is Rs 7 trillion? Instead, if the RBI reduces CRR by 25 basis points, I get about Rs 3,000 crore. So, if there is a CRR cut, then the transmission is more pronounced," the SBI chairman argued.
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