INDIAN BANKER SAYS RATES CUT AFFECTS PROFITABILITY
The cut in the lending rates and other
changes made in the interest rates will hit the profitability
of many commercial banks in India, Indian Banks' Association
chairman M. N. Goiporia told a bankers' conference.
    The changes were announced by the Reserve Bank of India on
March 31 and became effective on April 1.
    "Some of the latest credit policy measures such as reduced
lending rates, raising the statutory liquidity ratio and
restructuring of deposit rates will pose a potential threat to
commercial banks' continuing higher profitability levels," he
said.
    Goiporia said most foreign and Indian commercial banks
including those owned by the government have been making
profits over the years, mainly due to better fund management
and the enlargement of the banks' capital base. He did not
elaborate.
    The Reserve Bank's new credit policy for commercial banks
cut the maximum lending rate by one pct to 16.5 pct, raised
rates on deposits of two years by a half pct to nine pct and by
one pct to 10 pct on deposits of more than two years. To cut
excess liquidity in the industry, the Reserve Bank raised the
banks' liquidity ratio by a half pct to 37.5 pct, immobilising
nearly five billion rupees of deposits, bankers said.
 REUTER
