Veteran, Former Chairman of Oriental Bank of Commerce,
B D Narang shares his thoughts on how this issue is panning
says that banks need to improve their source of earnings,
other than interest earnings. Indian banks are very well
regulated and there are many ways to cut down on liquidity.
do you think the bank chairman would respond to what has
come in from the finance ministry now?
Personally I am very happy. We were getting a higher rate
of growth only on the strength of cheaper and easier availability
of the money to the corporates. We have to draw a compromise;
are we looking for a little check on inflation or are
we looking for sustained growth.
what we need is a higher rate of growth, we need more
jobs, and we need more of that kind of GDP. So the banks
will come under pressure, no doubt, but they have ways
to make money through other means.
can introduce more products; they can increase their service
charges by improving services. So banks have ways to compensate.
But once the signals go for expensive money, the rate
of growth always gets stunted. At this point of time,
at this stage of the economy, I will value rate of growth
more than the few banking chips.
do increasing things like service charges help the ultimate
customer because of whom the rates are being rolled back
or recommended being rolled back?
Banks come under pressure; nationalised banks in particular
make money only from the interest arbitrage. We need to
improve our sources of earnings, other than interest earnings.
If you go to ICICI Bank, and ask for a statement of account,
they will give it to you immediately, but they charge
why can't we just improve our services. So our customers
will be pleased to pay us extra service charges for better
service. That kind of good service can always compensate
for this higher increase in interest rates.
you have answered the same had you been at the helm of
the public sector bank when you were working?
Maybe slightly different, but I have a different perspective
today. I see the world moving in a different way. As a
retired person, I go to various banks, I go to various
institutions and I find that the customer is prepared
to pay for a good service. Why can't we focus on that?
banks and non-government shareholders are the minority
shareholders, is it fair to to load on them what the government's
I would have been very happy if this pause or this signal
had come from the RBI. That would have been much more
durable and sustainable. Coming as a sort of a dictat
from the government is a bit of aberration.
this also not fighting the global flow, the central banks
across the globe are increasing rates as did the RBI,
so why shouldn't the banks?
Indian banks are very well regulated and there are many
ways to cut down on liquidity, so RBI has been doing all
that. There are a number of
ways to do that; interest rate is one of them. But had
this signal come from RBI, things would have been totally
different. This is not a signal that one would expect
to come in from the government.
also see : The government is right
since bank rate has not changed: M S Kapur