After causing much damage to banking system RBI data now reveals that the impact of high cost deposits coupled with slowdown in lending may result in shrinking of margin of the banks. Long ago I had pointed out that bankers are raising deposit rates abnormally without taking care of lending rates. When interest rate on deposits rises, depositors will not delay in switching over to new rate structure. Most of big depositors prefer breaking of old deposits and avail high rate of interest under new structure. But the same things do not appear to happen in lending rate. More often than not, it takes 15 days to 30 days in message reaching to branches. Then it takes months together for branches to actually put the increased rate into action. There may be several such branches where still old interest rates are continuing on advances. Such negligence although do not occur in CBS branches ,non CBS branches covering more than 50 percent of business undoubtedly affects the margin available to banks. Moreover in many cases of retail lending, rate chargeable on advances is fixed and hence cannot be changed. To add fuel to fire, major portion of the advances in most of the branches (I would say more than 50 percent) are non performing assets in practice. Though not all bad advances are declared as non performer by banks it causes damage to bank's health slowly but steadily.RBI will be awakened from deep slumber when it is too late. Altogether impact of such unwise policies is that ba
