Banks must reduce transaction cost, says Sinha

CALCUTTA APRIL 2: Union Finance Minister Yashwant Sinha today urged banks to cut transaction cost as a follow-up to Reserve Bank of India'...

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CALCUTTA APRIL 2: Union Finance Minister Yashwant Sinha today urged banks to cut transaction cost as a follow-up to Reserve Bank of India’s reduction of bank rate.

"The RBI had done its duty by acting comprehensively on the monetary front. The banks will have to fall in line by reducing transaction cost,” he said while addressing members of the Bankers’ Club here.

Stating that the transaction cost could be reduced by increasing the volume of transaction, the Finance Minister, however, admitted that it would not be an easy goal to achieve.

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He said Indian financial institutions must adopt stringent prudential norms to `live and flourish’ in the competitive world of international financial markets which are `crowded with institutions, instruments and money.’

Reiterating his Government’s commitment to make the agriculture, banking, finance and service sectors globally competitive, he said the decisions on fixed exchange rates and quota restrictions would not be withdrawn. "The only way in which we can go is greater liberalisation and competiveness. Therein lies the salvation of the Indian economy.”

On the issue of recovery of non-performing assets (NPA), Sinha advised the bankers to strengthen the settlement mechanism for NPAs, to formulate a machinery for appraisal so that fresh NPA were not created, to come down heavily on wilful defaulters and to be bold enough in writing off NPA where necessary.

Stating that Government planned to give the banks a stronger legal framework against wilful defaulters by amending the Debt Recovery Tribual (DRT) Act, he said it would give banks the power to attach the property of the defaulter concerned till his case was disposed off by the DRT.

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Asserting that banking services in rural areas would have to be made more efficient, the Finance Minister said it must be done by training and motivating the employees, besides adopting the practice of surprise inspections where necessary.