Lazy Banking

LAZY BANKING

YAAAAAAWN!!!!

Prelude…. 1998-2003- Top four IT companies generated a revenue of Rs.28000 crore, 170,000 jobs and Rs.200,000 crore of investor wealth........

Okay So……

Here’s the Big deal….  Not

a single rupee was borrowed from the banking system.  What were the banks doing then?

Laaaaaaaazy banking….

The Story….  Between

1998 and 2003 banks reduced their lending to commercial sector and put its money in government bonds.  As much as 45% of funds at their disposal had been used to buy government bonds which are issued to finance the deficit.

Good news for banks….. Aggressive interest rate cuts by RBI in 1999.  Bond Prices Soared high.  Banks make profit doing nothing. 

But!!!!!!!!!

Bad news for the economy!  Companies



were being denied credit.

Commercial sector started choking.

 Small

Companies were the worst hit.

Annual Bank Economists conference 2002

The Christening…. RBI Deputy Governor, Rakesh Mohan Criticisedthe banking community for their sloth and Coined the phrase “Lazy Banking” for this entire phenomenon.

Thank You !!!!