Despite inflation touching a new high, necessitating consistent tightening of monetary policy by RBI, CMD Bank of Baroda MD Mallya is bullish about the Indian economy (?A slowdown in credit in real estate and consumer loans?, Aug 18). Banks? net interest margin has come under pressure following consistent hikes in CRR by RBI in the recent times. The hardening of the rate of interest is certain to raise the cost of deposit. Raising resources, especially at a low cost, is going to be extremely tough for banks to fund credit expansion. The implementation of Basel-II norms by domestic banks from March 2009 would further entail huge capital to meet various perceived risks. Greater uncertainties due to volatility in the capital market, fluctuating oil prices and various other factors are another matters that must now learn to live with. Banks are surely in for tough times ahead.
?Srinivasan Umashankar, Nagpur
