Bangalore:
The union finance ministry has asked public sector banks
(PSBs) to focus on raising low-cost funds, particularly
current account and savings account (CASA).
Most
large banks currently have a CASA base of barely 20 per
cent.
The
ministry, at a meeting with top bankers, has conveyed
that it wanted this ratio to be raised to 35 per cent
of their respective demand and time liabilities, said
the head of a PSB who attended the meeting.
Among
the banks that are close to the Ministry''s prescribed
CASA, are Central Bank of India and Vijaya Bank.
The
Ministry''s concern is largely due to PSBs offering high
interest rates on short-term deposits at rates close to
10 per cent. Such rates were being offered for tenures
of slightly above one year.
Bankers
said that one of the major areas of concern for the ministry
was that the high rates were inconsistent with the current
inflation trend. With year-on-year inflation at just 4.3
per cent, the real rates were well over 5 per cent. Historically,
one-year real deposit rates have seldom exceeded 2 per
cent.
The
government''s fear was that such high rates would lead
to a cost push effect on lending rates.
The
implication was that the current regime of high rates
would lead to an escalation in the weighted average cost
of working funds and in turn impact credit off take, particularly
in the productive sectors and adversely impact the GDP
growth target of 9 per cent.
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