Opinion

Letters to the Editor dated June 08, 2022

Updated on: Jun 08, 2022

Rate hike, no surprise

The decision of Monetary Policy Committee (MPC) of RBI to raise the benchmark interest rates by 50 basis points to 4.90 per cent does not spring any surprise as inflationary pressures in the economy has not yet abated fully with food and fuel inflation continuing to skyrocket. No doubt, banks and non-banking finance companies will increase the repo-linked lending rates further and thus making new home, personal and vehicle loans costlier.

With inflation staying beyond upper tolerance level of 6 per cent, RBI is expected to persist with monetary tightening measures in the months ahead.. While the rate hike could help the government to rein in inflation, its negative impact on consumption and demand cannot be overlooked.

M Jeyaram

Sholavandan (TN)

Improve banks’ digital infra

This is with reference to the article ‘Banks need to adapt to rising credit demand’. Banks’ credit disbursement has been slowly picking up.

With the RBI increasing the repo rate, banks have to concentrate more on mobilising deposits by increasing the interest rate on them which is long due. Given low deposit rates, people have opted for other investment avenues such as mutual funds and equities.

With some banks hiking deposit rates bank deposits may once again become attractive. Banks must offer a constant deposit rate to senior citizens like 11 or 12 per cent to garner the deposits from senior citizens.

Efficiency of digital infrastructure and management of customer service also holds the key.

In this digital era more efficient customer service including doorstep banking is the need of the hour.

TSN Rao

Hyderabad

Banks must lend cautiously

With reference to ‘Banks need to adapt to rising credit demand’ (June 8), the Asset-Liability Committee (ALCO) in banks which is headed by the CEO addresses the issues related to Liquidity, Interest rate and Currency risks.

The financial assets and liabilities of a bank are accommodated under various time-buckets to study the risks involved. The Committee’s observations are placed before its Board at its monthly meeting for scrutiny. With the effective functioning of ALCO, liquidity risk or interest rate risk is practically nil with banks today.

The real threat is posed by market and credit risk. As for market risk, the major part of it centres around the banks’ treasury operations. While a dynamic Treasury is welcome, an aggressive Treasury is obviously exposed to great market risk.

As for Credit risk, the good old “3 C” canon — Capital, Capacity and Character — still holds good. The ‘templated appraisals’ or an arithmetic reading of financial ratios have their own limitations. Though banks must lend more to foster economic recovery they cannot lose sight of the credit risks.

Also it may not be wise on the part of the government or RBI to goad them into any sort of aggressive lending, as credit dispensation involves depositors’ money!

R Mohan

Kumbakonam

Changing work pattern

Apropos ‘The world of work is changing’ (June 8), The Work From Home (WFH) concept was existing in IT and ITES sectors even before the pandemic period. IT professionals were working remotely through secured VPN networks.

Lockdowns forced many industries especially IT and ITES to adopt the WFH concept on a wider scale. WFH has its pluses and minuses. On the employer's side, it results in huge cost savings through reduced office space and other related overhead such as electricity, air conditioning and food. On the employees’ side, there are savings on costs and time on commuting, relocation expenses, thus contributing more time on work.

Now, there has been a shift in the working style to four-day week. In India, we still have a six-day week in many sectors, especially banks and financial institutions. Thinking of four-day week in India still has a long way to go.

RV Baskaran

Chennai

Published on June 08, 2022
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