Lazy Banking

When the savings rate is down to 2 75.

Lazy banking. Ron shevlin is director of research at cornerstone advisors. Banks are being encouraged to lend instead of parking their resources with the rbi and earn risk free interest income. This lazy banking phenomenon of circulating money within the banking system itself stemming from an extreme aversion among banks to lend money to risk prone debt laden commercial borrowers has seen a tide of surplus money totalling rs 6 9 lakh crore flow back to the rbi as of april 15. If the banking sector is populated by such lazy banks then a one dollar government borrowing may result in more than one dollar crowding out of private credit.

However off late most indian banks instead of lending money invests depositors money in government bonds looks at low returns at negligible risk. Tamal bandyopadhyay keeps a close eye on all things banking from his perch as mint s deputy managing editor in mumbai. The potential negative efiect of government borrowing on bank s incentives moral hazard has been widely discussed in recent years in many developing countries. Smart marketers will help create this new breed of financial activist and not simply try to compete on rates and fees.

Lazy money or financial apathy is one of the biggest enemies of many financial firms. Or should we say easy banking.