Addressing the annual bankers' conference - Bancon 2010, the RBI Governor Dr D. Subbarao has asked banks to reduce their net interest margin (NIM) by increasing the deposit rates and reducing the lending rates.
Though the net interest margin of the Indian banking system has narrowed from 3% in 1999-2000 to 2.5% in 2009-10 , it is still higher than some of the other emerging economies, even after accounting for the mandated social sector obligations such as priority sector lending and credit support for the government's anti-poverty initiatives.
He said, said, "To achieve double-digit and inclusive growth, we need to raise the level of national savings and channel those savings into investment."
Blog take - It is indeed not fair that so many Indians are paying high and exorbitant interest rates for repaying loans. For people who are buying their first or second home, interest rate should actually be bare nominal like in the range of 1% or 2%, as the intention isn't speculation but securing a future. The basic argument against such low interest rates can be high inflation and deposit rates in India. But then, innovative instruments can always be developed. Like banks can be given some relaxation in CRR norms if they deploy a stipulated amount in such lending, creating UID based targeted schemes, allowing increase in tax benefits etc. Can Indian Government really think out-of-box and take bold measures for the low/middle income class? Isn't ensuring a secured future for Indians a top priority for the government?
He said, said, "To achieve double-digit and inclusive growth, we need to raise the level of national savings and channel those savings into investment."
Blog take - It is indeed not fair that so many Indians are paying high and exorbitant interest rates for repaying loans. For people who are buying their first or second home, interest rate should actually be bare nominal like in the range of 1% or 2%, as the intention isn't speculation but securing a future. The basic argument against such low interest rates can be high inflation and deposit rates in India. But then, innovative instruments can always be developed. Like banks can be given some relaxation in CRR norms if they deploy a stipulated amount in such lending, creating UID based targeted schemes, allowing increase in tax benefits etc. Can Indian Government really think out-of-box and take bold measures for the low/middle income class? Isn't ensuring a secured future for Indians a top priority for the government?
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