"The funny money is gone and now we are all coming down to earth"

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: happen?

Because of the scare which we saw in the second half of September or early October, where you saw inter-bank rates going up substantially, there was an element of worry — let us take as much money as we can. So, the banking system feared what would happen if the money suddenly evaporates. The psychology of banks is that they should spare some money and keep the deposit rates high. Also, once I start taking deposits, I must keep more liquidity with me. And the moment I keep more liquidity on which I am earning low returns, I am carrying negative spreads. So, whatever I lend, I have to lend higher. Look at some of these electricity boards. They are subsidising the consumers. So they keep the industrial rates so high that it becomes very tough for the industry to afford. In a way, if the banks are borrowing at high rates, that is an issue but that is coming out of this shortage worry. One thing is clear: banks did not price risk well.

Shaubik Chakravarti: What should a single bank look at?

Bankers should move away from the fear that there is a shortage of money. Then, there must be confidence that the economy is not going into a tailspin. And that is the concern today because then the banks start pricing risk higher. Commercial vehicles, autos, real estate and many other sectors are beginning to see dramatic drops in the sales lines. We need to create a certain base level of confidence.

Shaubik Chakravarti: Auto loans are going at 18-24% now…