The Hindu : Tamil Nadu / Chennai News : Banks asked to redefine strategy

Online edition of India's National Newspaper
Saturday, Sep 24, 2005

Tamil Nadu

Tamil Nadu - Chennai

Banks asked to redefine strategy

Special Correspondent

"Meet the challenge from foreign banks while fulfilling farmers' requirements"

INAUGURATION: C. Rangarajan, Chairman , Economic Advisory Council to Prime Minister, addressing the 19th Triennial Conference of the Indian Overseas Bank Officers Association in Chennai on Friday. — Photo: R. Shivaji Rao

CHENNAI: : C. Rangarajan, Chairman, Economic Advisory Council to Prime Minister, has called upon the banks to evolve appropriate strategies to enable Indian firms to access funds at competitive rates and meet the challenge from foreign banks, besides fulfilling the credit requirements of marginal and sub-marginal farmers.

Inaugurating the 19th triennial conference of the Indian Bank Officers' Association (IOBOA) here on Friday, he said as the Indian economy got increasingly integrated with the rest of the world, the demands of the corporate sector for banking services would change not only in size but also in composition and quality. Against this backdrop, provision of a whole gamut of services would be a challenge as the foreign banks had access to much larger resources and had presence in many parts of the world, he added.

Another aspect that required special attention related to provision of credit to small and marginal farmers, he said, adding that the proportion of production loan and institutional credit to these sections were lower than for all farmers. Stressing the need for a re-look at the organisational structure of the rural bank branches, he said they must go beyond providing credit and extend a helping hand in terms of advice on matters relating to agriculture.

Interest rates

On the slow-down in the growth of deposits in banks, he said, as savings in financial assets as a proportion of GDP at current market prices came down to 9.9 per cent from 11.4 per cent in the previous financial year, he said, "there is a case for slight upward adjustment of interest rates on deposits while reducing the rate on small savings."

Besides deregulating the interest rate on savings accounts in banks, it was also desirable to move towards offering interest on a daily product basis, he opined.

The banks had to prepare themselves to grapple with challenges such as greater specialisation in different niches, reliance on non-fund business, overlap in product coverage between commercial banks and non-bank financial institutions, financial disintermediation with large companies accessing securitised debt domestically and from financial market abroad, Dr. Rangarajan said.

A significant improvement in customer service by banks could no longer be ignored, he added.

T.S. Narayanasami, Chairman and Managing Director, Indian Overseas Bank, underscored the importance of continued joint efforts by the management, officers and employees to meet the challenges before the bank.

K.V.Acharya, general secretary, IOBOA, highlighted the association's social service activities. K. Anandakumar, president of the association, said merger of banks would be detrimental to the health of the banks and the country's economy.

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