On the background of rising non-performing assets (NPA) in the banking system, The Reserve Bank of India (RBI) on Thursday clarified that the huge exposure of the banking system on account of the 3G and the broad wireless access (BWA) auctions is not a matter of concern.
RBI deputy governor KC Chakrabarty said there was no case for concern over banks’ exposure in telecom industry through the auctions. ?When banks are giving loans under a regulatory framework, RBI has the comfort that our banking system has the capacity to manage the risk.?
On being asked as to whether private sector banks’ base would be higher than public sector bank base rate, Chakrabarty, said that RBI was not much concerned about that. ?We don’t bother about that. The competition will take care of it. That is what the purpose of deregulating interest rate.?
Meanwhile, ahead of the base rate regime from July 1 , public sector banks have indicated that their base rate would be in the range of 7.5%-8.5%.
Said Mohan Tanksale, executive director of Punjab National Bank (PNB), ?Our base rate will be in the range of 8-8.5%. We will crystallise on this after our board meetings, may be by 28th of this month. We are yet to decide upon the other modalities for calculating the base rate. We can take deposit cost of fund. All the parameters are open. RBI has allowed us to keep it open till December.?
The RBI has already asked banks to replace their prime lending rate with the base rate in order to bring in more transparency in lending rates. M Narendra, executive director, Bank of India, said, ?We are yet to finalise our base rate. A committee working on it will shortly come out with the rate. I am sure, it will be in the range of 8-8.5%.?
However, the bankers said the new system will not going to bring down the rate of interest on loans for borrowers, but would address transparency. There is no question of mis-selling of loan products in the base rate regime, they said.
On NPAs, Tanksale said, ?Things have definitely deteriorated, but there are specific reasons behind it. Particularly, agricultural loans are slipping into NPAs. A few banks, including PNB, have already treated them as NPA. In the month of December 2009 alone, PNB had Rs 363 crore on agriculture NPA.