Banks to benefit from interest rate futures: IBA

Written by Sajan C Kumar | Chennai | Updated: Jun 19 2009, 06:29am hrs
Exchange-traded interest rate futures are the logical next step to the currency futures launched some ten months back, said M V Nair, chairman, Indian Bank's Association (IBA). Speaking to FE on the sidelines of the launch of Union Bank of India's enhanced mobile banking services, Nair, who is also the CMD of the bank, said, We have very strong players in currency futures and it is only logical that interest rate futures are introduced. The introduction of the interest rate futures will be beneficial for the banks, he added.

The IBA is close to signing the wage pact with trade unions after a long-delayed negotiations that lasted over two years. IBA has already completed nine sittings and we have all set to sign on the dotted lines soon, Nair said. The employees of the PSU banks will be getting more than 15% increase in their wages once the deal is signed.

Asked about the consolidation trends in the banking industry, he said it is natural that when two managements come together for amalgamation, government would act as facilitator. But, currently, the industry has not been witnessing this kind of trend and all are focussing on performance parameters.

While delivering the key note address at the launch, Nair said Union Bank of India will emerge as the most preferred bank by 2010 in all parameters. The bank has maintained continuous growth record in all business parameters during financial year 2008-09, reflecting a year-on-year growth of 24.5% in net profit at Rs 1,727 crore.

Nair said the banks have to shift from cash to cashless transactions in all business segments. Even today a substantial portion of business transactions are taking place in cash, forming a significant part of GDP. This necessitates the need for holding huge cash balances resulting in avoidable inefficiencies, he said.

The bank, by leveraging on 100% CBS networked branches is gradually moving its cash transactions through electronic channels. During the last one year bank's transactions through electronic channels have moved from 6% to 23% with an aim to reach 35% by the end of the fiscal. "Mobile banking enables customers to make cashless transactions and also facilitates and encourages usage of alternate delivery channels", Nair said.