Financial Daily from THE HINDU group of publications
Friday, Jan 30, 2004
Financial Daily from THE HINDU group of publications Friday, Jan 30, 2004 |
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Money & Banking
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Interest Rates Banks advised against lowering deposit rates further Our Bureau
Chennai , Jan 29 THE Chairman of the 12th Finance Commission and former Reserve Bank of India Governor, Dr C. Rangarajan, today cautioned banks against reducing their deposit rates further. He said that it was important to keep the interest rate "at that necessary level to generate savings and investment that are needed to support rapid economic growth". Speaking at the centenary celebrations of City Union Bank, Dr Rangarajan said that there was justification in keeping the lending rates low. "However, any further reduction in the lending rate must be achieved by reducing the spreads between the deposit rate and the lending rate than by lowering bank deposit rate." Improvements in efficiency must result in narrowing of the spread. "The areas which need improvement are known. Imaginative corporate planning combined with organisational restructuring is a necessary prerequisite to achieving results." He added that technology was only a means to achieving better customer service; what was more important was the attitude and approach of the people working in the bank at all levels. Recounting briefly the banking sector reforms of the last 13 years, Dr Rangarajan said: "The effort has been to steer the development of the banks in the desired direction without subjecting them to undue shocks." As such, banks will have to learn to operate in a more competitive environment in the coming years. In 1981, the assets of the banks constituted 73.8 per cent of the total financial assets of banks and financial institutions. But by 1997, this ratio had slid to 63.6 per cent. The Chairman of the City Union Bank, Mr V. Narayanan, recounted the history of the bank and said that the bank was in the process of networking all of its branches.
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