TODAY -

Resourceful small banks: Operational soundness a must

Dr BK Mukhopadhyay *



Spiraling prices of essential commodities are currently leading to spurt in food price inflation, fluctuating liquidity in the system alongside lower-than-expected credit off-take, topsy-turvy industrial recovery. Lesser credit off-take continues to crimp the banking industry.

Therefore, the Government has to do a balancing act of sustaining economic growth on the one hand and maintaining price stability on the other hand. Side by side the monetary authority's prime role is to be maintained - steps necessary towards gradually weaning away the economy from its current dependence on accommodative monetary policy and make it market-driven with an aim to prop up growth and arrest inflationary pressure.

These may be the beginning of a reverse trend. The muted growth of credit is likely to be stimulated and buoyancy is restored. The growth of economy is expected to be faster with the increased demand of credit. It is of course commending that the RBI has started to withdraw liquidity and has taken a pragmatic view to exit from the accommodative monetary policy step by step.

The RBI is moving towards monetary tightening slowly and steadily so that growth is not affected. Thus, the inflationary pressure needs to be controlled without affecting the momentum for growth.

For small banks, performance in many of the controllable areas has not also been good so far as the HR Management is concerned, and a huge gap is noticed not to mention the lack of transparency in talent retention, which, in turn, has remained more restricted to paper works only.

Especially for the small banks [in public sector too] the need is there to better operational performances. One of such vital areas has been comparatively high cost-income ratio. The cost-income ratios of some of the small banks are still unfavorable [quite high] compared to the biggies and thus these small banks must improve upon by increasing the business rapidly.

Besides profitability, other vital indicators such as strength and soundness, credit quality, growth and efficiency, betterment of cost-income ratio - one of the top sub-criteria in the arena of profitability - occupies the central place.

Efforts must be on to move towards that direction so that within a reasonable time the ratio becomes nearer to the peer group level.The betterment, in turn, is hinging upon two vital wings - minimization of cost [interest plus operating] and maximization of income [interest plus non-interest].

The first area has been on the rise due to external factors as well as internal factors, while the second area reflects better picture emerged from the segments.

Targeting at better cost-income ratio the Banks have, no doubt, taken a number of positive steps to restrict the growth of operating expenses while at the same time increasing the net interest income as well as non-interest income. Cost-Income ratio is defined as Operating Expenses divided by the sum of interest income and non-interest income less interest expenses.

Cost-Income Ratio =



On this score the focus areas have been: increasing low cost deposits [CASA]; increasing quality lending in Retail, SME, Agricultural sectors; recovery of NPAs through rigorous follow up inclusive of recovery in Written off accounts; restricting avoidable expenses; increasing non-interest income through LC / LG business as well as para-banking activities - these initiatives could help the cost-income ratio to come down steadily.

Though a number of areas are there that registered good growth [include, among others: number of total branches is going up; business under CBS has been 100 percent; number of employees went up along with that of business per employee and that of profit per employee was up, yet there had been a decline in yield of advances.

Major reasons for decline in yield on advances were, among others - reduction of BPLR Lending to low yielding short term loan; increase in non-performingadvances resulting in falling interest earning on advances.

The overall position of the Banksshould reflect that the banking business indicators would be moving north in many areas whereas in number of other areas a fall can be resisted: Cost to income ratio, net interest margin, cost of deposits, cost of funds and return on assets. The NIM position is also to register a satisfactory trend.

The strategic Plan of the Bank should be a realistic and achievable one, which, in turn, could result in lowering the ratio.

To reduce the cost of deposits the Banks have to take a conscious decision to shed high cost bulk deposits. Of late there has also been a decline on this score and this has mainly due to non-renewal of bulk term deposits mobilized at higher rate earlier. Recently revised mode of interest payment on SB also reasonably expects SB to grow by larger volume. Rightly, utmost importance is being placed on boosting the CASA section. Hence fall in deposits cost is reasonably expected.

This, when added to comparatively lesser emphasis on term deposits, will jointly have impact on interest expenses [i.e. interest on deposits plus interest on borrowings]. Side by side, operating expenses on staff has been going up due to payment of arrears plus revised salaries' implementation. Rise in operating expenses other than staff expenses is also having a tendency to go north.

So, the total expenses [interest expenses plus operating expenses] are all set to go up. To counter such cost escalation the steps that are to be actively followed are also worth mentioning on this score: boosting the overall business; intensive recovery drive; curtailment of comparatively avoidable expenses; customer centric approach; full utilization of existing infrastructure; boosting staff productivity / skill up gradation through intensification of the Bank's own training system; quality lending - emphasis on agri / SME lending - better yield on advances; expansion of distribution channel

Merger for merger's sake does not and will not do the needful. Merger-amalgamation process must be goal oriented. The regional rural banks have been merged to form a single entity: has it solved the problem of non-recovery of loans, profitability, employee productivity or best utilisation of manpower?

Simply asking banks to merge does not serve any purpose if the goal itself is not well defined. It remains also a fact that privatization alone cannot solve the poor performing banks problems. Better is to locate the reasons - policy failures, leadership gaps, nepotism, unprofessional approach to the market and the like.

The need is very much there to follow a defensive marketing strategy as well so that the aging building does not suffer from unnoticed pilferage. Boosting a business is not rocket science. Reality is something where one has to keep pace with the changing needs and thus correcting the strategies to be followed.

What is more, one particular strategy is not going to necessarily give lasting success. As the very term strategy is borrowed from military science - the process followed should adhere to the situation warranted. So more effective efforts are to be there to better the overall performance. Banks' pragmatic market-oriented strategic plan could definitely help achieve higher growth targets.


* Dr BK Mukhopadhyay wrote this article for The Sangai Express
The writer is Professor of Management and Author of the book 'India's Economy: Under a Tinsel still Tough'
This article was webcasted on February 20, 2020.



* Comments posted by users in this discussion thread and other parts of this site are opinions of the individuals posting them (whose user ID is displayed alongside) and not the views of e-pao.net. We strongly recommend that users exercise responsibility, sensitivity and caution over language while writing your opinions which will be seen and read by other users. Please read a complete Guideline on using comments on this website.




LATEST IN E-PAO.NET
  • Violence in Manipur 2023-2025 : Timeline
  • COVID-19: Update 30 June 2025 : Manipur
  • Kang @Leikai in Imphal : Gallery
  • July Calendar for Year 2025 : Tools
  • COVID-19 : A recurring crisis in Manipur
  • DC Kaith and Forestry in Manipur : Book
  • COVID-19: Update 29 June 2025 : Manipur
  • Longing for Peace :: Poem
  • Black badge, slogan protest by peeved scribes
  • Present the true picture before Delhi
  • Pung-Cholom @ Polo Tournament : Gallery
  • Life: A Journey Through Thought & Being
  • Khongjai Hills & Kuki claim to indigeneity
  • Master Time by Managing Information
  • COVID-19: Update 28 June 2025 : Manipur
  • Pride & patriotism in CCpur's army families
  • The Power of Poppy - 87 :: Poem
  • World Decarbonisation Day: green environment
  • Welcome Home - Nganthoi #2 : Gallery
  • Loss of two precious lives from Manipur
  • Balancing civil liberties with public safety
  • COVID-19: Update 27 June 2025 : Manipur
  • Gender equality & human rights are indivisible
  • Stay hydrated this summer season
  • Silent Half of the Sun :: Poem
  • Connecting the dots in the wishlist
  • Assembly record tampering claims by ex-CM
  • The immortal legacy of Pukhramba Kajao
  • Yaingakpa, Renglien, Thariktha : eMing
  • International Day against Drug Abuse 2025
  • COVID-19: Update 26 June 2025 : Manipur
  • Black pottery from Ukhrul - tribal heritage
  • Program on "Mission-Drug Free Campus"
  • Play makes a better world
  • Urgent Appeal to the Honourable MLAs
  • Tribal Empowerment Campaign at CCpur
  • Talk doing the round: PM to come
  • 'Emergency' relief for under-fire BJP
  • Golden Jubilee Art Fair @Imphal : Gallery
  • Declaration: Meetei People Convention, Delhi
  • A Flower Among the Rocks :: Review
  • Book Donation Campaign
  • Improved road connectivity boosts livelihoods
  • To Have Great Dreams :: Poem
  • COVID-19: Update 25 June 2025 : Manipur
  • Regret vs Sorry: Technical & moral insight
  • Cocktail of inept Govt, selfish people
  • State trailing others in cleanliness
  • Colonial Knowledge in NE India #6
  • UHI effect & rising temperatures in Manipur
  • Frequent road blockades cripple economy
  • COVID-19: Update 24 June 2025 : Manipur
  • Unite Health with Community health services
  • NSU, Imphal, tops IIRF Ranking 2025
  • Endless conflict :: Poem
  • Pak nobel pish prize for Trump
  • May 3, 2023 - June 24, 2025: Failure of Delhi
  • Hotter days, sudden rainfall no more a rarity
  • "The Great June Uprising" #2 : Gallery
  • How to Build a Career, Lead with Purpose
  • 2nd Foundation Day- Karnataka Meitei Assn
  • COVID-19: Update 23 June 2025 : Manipur
  • NSCN-IM Amnesty threatens to isolate it
  • Sunset :: Poem
  • Intl Yoga Day for a healthier environment
  • Of clogged drains and plastics
  • Poor roads testify Govt indifference
  • Welcome Home - Nganthoi #1 : Gallery
  • The Silent Erosion of Manipuri Language
  • Design health services around people
  • Serene Hills Host Inspiring Int'l Yoga Day
  • COVID-19: Update 22 June 2025 : Manipur
  • Chopper services between Senapati & Imphal
  • High Court Judges interacted with convicts
  • Redyeing the Fabric :: Poem
  • Differences yet to be resolved stand
  • Border fencing rage as solution eludes
  • Radio E-pao: 14 new songs updated
  • Climate Adaptive Agroforestry
  • Manipur overlooked demographic shifts
  • Young designers shine on Fashion Stage
  • COVID-19: Update 21 June 2025 : Manipur
  • International Day of Yoga at Lamphelpat
  • International Day of Yoga at JNMDA
  • The Power of Poppy - 86 :: Poem
  • Keishampat Lairembi Haraoba #1 : Gallery
  • Crisis in Manipur's Contemporary Education
  • Best 8 Performances in Manipuri Cinema
  • Identity: Caught between China & India ?
  • COVID-19: Update 20 June 2025 : Manipur
  • To The Father Who Listens :: Poem
  • How does net suspension affect youths ?
  • Targeting farmers to cripple state's economy
  • The virus is back and spreading
  • Who is afraid of Manipur ?
  • A threatened lily growing at Shirui Hills
  • World Environment Day in Manipur : Gallery
  • Ambubachi Mela at Maa Kamakhya
  • COVID-19: Update 19 June 2025 : Manipur
  • Dolls made from repurposed vegetable refuse
  • Condemns Attack on Farmer & Killing
  • Abhorrent politics of SoO
  • Police arrogance on harmless drivers
  • "The Great June Uprising" #1 : Gallery
  • Solution from Buddhist & Jain perspectives
  • AI sparks employment concerns in Manipur
  • Greatest Foe :: Poem
  • Chief Justice at Relief Camp, Kangpokpi
  • Call for Recognition of a 3rd Category of IDPs
  • Jun 18, 2001- May 3, 2023: Seed of violence
  • Contract scam in hill districts
  • Colonial Knowledge in NE India #5
  • Spaced Out - Panthung Di Kadaaida! : Rvw
  • Condemns the Killing of Abdul Qadir
  • COVID-19: Update 17 June 2025 : Manipur
  • Thoubal aspirant makes Manipur proud
  • Tamenglong hospital brings quality healthcare
  • Chief Justice at Relief Camp, Mayang Imphal
  • Kuki CM & Sixth Schedule
  • Selective protests, selective silence
  • Nailing the culprits need of the hour
  • UK Meetei diaspora run for Myanmar : Gallery
  • Erwin Khundrakpam : NEET-UG 2025 topper
  • Will we rise to #endAIDS challenge or stumble
  • COVID-19: Update 16 June 2025 : Manipur
  • Appeal to Prime Minister: Manipur Crisis
  • Urges Action on Misinformation
  • Condolences : 2 young cabin crew
  • Grateful To Be Alive :: Poem
  • Making bonfire on the roads
  • Aggression yet again, inspite of playing victim
  • Aftermath of flooding @ Khurai #2 : Gallery
  • Zomia, geopolitics, & the struggle for unity
  • COVID-19: Update 15 June 2025 : Manipur
  • Condolences : Demise of 2 Manipuri Girls
  • Manipur unites in grief after Air India tragedy
  • Hail arms recovery as step toward peace
  • Cleanliness Drive at JNIMS Campus
  • Global Wind Day for a clean environment
  • First came the rain, then the heat
  • Rise in Covid-19 cases
  • Thang-Ta Day @Khuman Lampak #3 : Gallery
  • Meetei diaspora in UK runs for Myanmar victim
  • Manipur empower children with disabilities
  • COVID-19: Update 14 June 2025 : Manipur
  • World Blood Donor Day 2025
  • The Power of Poppy - 85 :: Poem
  • A Northeast Gin Makes Its Mark
  • Mera Houchongba @Kangla #3 : Gallery
  • Saluting Nganthoi, Lamnunthem : Joining hand
  • Condolence : Nganthoi & Lamnunthem
  • From Earth Day to World Environment Day
  • COVID-19: Update 13 June 2025 : Manipur
  • JJM brings clean drinking water to CCpur
  • M.Tech CSE Admission at Assam University
  • Save your nails from damage this summer
  • No takers for Moreh cops' distress call
  • 50 years of Pebet #2 : Gallery
  • Implement Hill Areas (Chief Rights) Act 1967
  • Manipur fields shape India sport future
  • How to Speak Soft and Still Win
  • Thokchom Khoiba : mosquito killer machine
  • Looking for wealthy groom, question you too
  • When is the net ban going to be lifted
  • Stir speculations nix school reopening plan
  • Indo-Naga Talks (From 2012) :: Timeline
  • Colonial Knowledge in NE India #4
  • Namphake Monastery @ Dibrugarh : Gallery
  • Fire safety: preventive measures
  • Peculiar plants & incidents unique to Manipur
  • Artificial Intelligence & environment
  • Cutting off the nose to spite the face
  • Relief for daily wagers as shutdown called off
  • Protest @Checkon -AT arrest [Jun 9] : Gallery
  • The question of territorial integrity of Manipur
  • Animal Farm's allegory in dynamics of Manipur
  • Their hands deserve books, not burdens
  • JNV empowers Tamenglong students
  • We can do better- people with HIV live healthy
  • Bandh: The Cry Beneath the Silence :: Poem
  • Cutting short 240 hours general strike
  • Shutdown lifted, curfew eased, mobile ban
  • Protests - AT arrest [Jun 8 night] : Gallery
  • Review of 'Rain Stopping in Manipur'
  • Highway blockades trigger soaring prices
  • Voice of the Masses :: Poem
  • Congress may claim if none
  • Learning new skills related to AI
  • Delhi, Raj Bhavan: Losing the plot ?
  • CBI arrest after Governor clemency assurance
  • Aftermath of flooding @ Khurai #1 : Gallery
  • Appeals Home Minister not to renew SoO
  • Self-defence :: Poem
  • When will humans learn nature's lessons ?
  • Forgotten voices of drug users in Manipur
  • High-yielding RC Manichakhao-1
  • PC Editorial Blank Space : June 09 2025
  • TSE Editorial Blank Space : June 09 2025
  • Flooding at JNIMS Hospital #2 : Gallery
  • North East NSS Festival @ MU : Gallery
  • 27th Meira Paibi Numit : Gallery
  • Micromanager vs Leader
  • Valedictory Function of NE NSS Festival
  • WED at various campuses in Manipur
  • World Environment Day 2025
  • Trump's tariff legacy & its global echo
  • Flooding at JNIMS Hospital #1 : Gallery
  • Flooding Imphal East [31 May] #3 : Gallery
  • Flooding Imphal East [31 May] #2 : Gallery
  • Flooding Imphal East [31 May] #1 : Gallery
  • Sarangthem Nirupama at Miss Universe India
  • S Nirupama @Miss Universe : Gallery
  • Protesters to Raj Bhavan [May 25]: Gallery
  • Human Chain @Airport road [May 26]: Gallery
  • Miss Shirui Pageant Contestant: Gallery
  • 48 hrs Bandh: protest security forces: Gallery
  • Protest Rally: Journalist harassment: Gallery
  • HSLC 2025: Full Result (Check Roll No)
  • HSLC 2025: Important Info & Grading System
  • HSLC 2025 : Compartmental candidates
  • HSLC 2025 : Comparative Statement
  • HSLC 2025 : Statistical Abstract
  • HSLC 2025 : District Pass Percentage
  • HSLC 2025 : Govt School Pass %
  • HSLC 2025 : Aided School Pass %
  • HSLC 2025 : Private School Pass %
  • People's Convention on 3rd May #2 : Gallery
  • Featured Front Page Photo 2025 #2: Gallery
  • Riya Khwairakpam : HSE Science Topper
  • Keisham Hannah : HSE Arts Topper
  • Warepam Lidia : HSE Commerce Topper
  • HSE 2025 Result : Science Full Result
  • HSE 2025 Result : Arts Full Result
  • HSE 2025 Result : Commerce Full Result
  • HSE 2025 Information / Abbreviation
  • HSE 2025 Topper : Science
  • HSE 2025 Topper : Arts
  • HSE 2025 Topper : Commerce
  • HSE 2025 : Pass Percentage
  • HSE 2025 : Result Abstract
  • HSE 2025 : Candidates with Highest Marks
  • Ougri Lirol :: Part 1 : Ooba Video
  • President's Rule in Manipur : 1967 - 2025
  • Downloadable Manipuri Calendar :: 2025