MFIs only give money to borrowers but they are not allowed to raise deposits. Unless and until they are allowed access to small deposits, their cost of money will remain high as banks and they will not be able to bring down the cost of tiny loans that they offer to poor people. K.
After almost nine years, the Reserve Bank of India (RBI) last week changed the bank rate. It has been raised and realigned with the so-called marginal standing facility (MSF) rate. This is a technical adjustment to link it with RBI’s current policy rate, the repo rate, the rate at which the central bank infuses liquidity into the system.
The honeymoon did not last long as the trade union turned increasingly restless for fear of losing its grip over the bank, and with Chaturvedi reckless in his pursuit of growth. Had the 85-year-old Dhanlaxmi Bank Ltd, headquartered in a southern Indian state, been a human being, I would have said she has been suffering from schizophrenia. Its managing director and chief executive officer (CEO) Amitabh Chaturvedi quit last Monday.
The chief executive officer of a foreign bank, reacting to last week’s Banker’s Trust column on rising bad assets in Indian banking, has said things can get worse and at least six large banks will find themselves in a tight spot. I don’t want to name the banks, but one thing for sure is that the Indian central bank is worried about rising bad assets of banks. It is particularly concerned about five pockets of Indian industries where banks’ exposure can turn bad.