Banks/Finance-Achilles Heel
Most of what is happening today in this country and especially for the last 40-45 days is evident proof how short changed the Government is for cash. The tax receipts are not sufficient and there are few opportunities to create sizeable job generating businesses.
30 years ago as a contributor to FE, I received special encouragement from Dr. Khusro, who was the Editor at that time. Most of what I wrote was on Banking, not academic but professional stuff.
That still stands. There are no long term funds in Banks and hence they can only lend short term. Take today's scenario. 5 year Deposit rate 6.25 per cent, Savings Deposit-6 per cent. A 5 year spread is 0.25 per cent. On the other side 10Y Gsec is 6.66 per cent and Reverse Repo at 5.75 per cent. No bank can make 4 per cent NIM in an environment where there is no Capital, and Deposit lending spread is so negligible as to manage frequent salary hikes and NPAs. To me, this sector is a long term short. No bones about it.
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