Financial Daily from THE HINDU group of publications
Tuesday, Jan 31, 2006
Financial Daily from THE HINDU group of publications Tuesday, Jan 31, 2006 |
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Money & Banking
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Outlook `Net interest margins of banks under pressure' Our Bureau
Mumbai , Jan. 30 NET interest margins (NIM) are under pressure for the banking industry because deposit rates have gone up and there has been no corresponding increase in lending rates, said Dr Anil Khandelwal, Chairman and Managing Director, Bank of Baroda. BoB's NIM is at 3.3 per cent. Earlier this month, the bank had increased its deposit rates, but has no immediate plans to raise lending rates. "On the cost side there are pressures and on the revenue side there is competition," he said. According to Dr Khandelwal, banks are faced with increasing costs incurred on staff, provision for sanctions, technology and advertising among others. Banks have to, therefore, create new avenues of business such as fee-based income. "The challenge for public sector banks is to manage the cost-income ratio and maintain the NIM," he said. BoB has initiated steps to cut controlled costs such as office lease cost, Dr Khandelwal said. He was speaking to reporters on the sidelines of a press conference to announce the World HRD Congress, to be held in Mumbai from February 2 to 4. A big problem faced by PSU banks is to retain talent, as they cannot pay high salaries, Dr Khandelwal said. "We are able to hire management graduates but the problem is to retain them," he said. The bank is in talks with ITM Business School for developing courses to meet the specialised requirements of banks such as treasury management, Dr Khandelwal said.
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