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Monday, December 13

Meri Awaj Bhi Suno-Rising Bank Interest Rates determental to growth

Recently all the public as well as private sector banks are increasing interest rates on deposits as well as lending rates.I fail to understand the logic.While its true that most of the Banks are facing cash crunch & as a short term measure to attract the investor & public, interest on deposits is being increased bringing in much needed cash.On paper it could be a good ploy as every investor's prime concern is security.A win -win situation for everybody-Banks & investor.Banks are increasing there lending rates also which is but natural due to there rising cost of money on account of higher interest on funds mobilization.The plea is to curb inflationary trends in the economy & also price rise.This will where the problem will come as prices of all commodities will increase as the cost of money of the manufacturer & the trader will rise which in turn will be passed on to the consumer.Also to maintain there bottom lines price rise will be inevitable.The real concern on price rise is food prices which is badly affecting the public & government must know that no body is taking loans for meeting fooding expenses.So the contention of Government?RBI & Banks does not hold true.I am sure that increased lending rates will push up the prices of non-food items also to a great extent.Due to higher cost of money our domestic industry will be unable to compete in the International as well domestic markets.No doubt as a short term measure Banks could increase interest rates on deposits to bring in cash but refrain from increasing lending rates.Can increase lending rates on Cars,Beaverages like cola & alcohol & also loans extended to non priority sectors like 5 star hotels,luxury items etc..Banks can launch global deposit schemes in the foreign market to tap NRI funds.If the Banks don't think on such measures I am afraid our growth projections of 9% or so will be a distant dream.Surely we are inviting trouble in near future.God help us. Is Pranab Da listening????

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V P Marwah

Author & Editor

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