Wednesday, April 8, 2009

RBI of India Says No Room to Lower Rates

"The cost of deposits is still high. This will have to come down first. Then only will the lending rates ease," Narayanasami, who also heads Bank of India, said. He, however, added that the banks now have sufficient liquidity "as the RBI has slashed its key rates".

The banks want to reduce the amount that they pay you for saving before they reduce the amount that they get paid for lending. This is another reason that we need to have just one nationalized bank, where as a citizen dividend, no interest would be charged for lending and interest paid on deposits would be directly tied to the growth of the economy. THEN, let's see them whine about the cost of deposits! They couldn't compete with a bank that didn't charge interest on loans.

But we don't need more lending anyway. We need jobs. We need income. And if our jobs don't pay enough for us to live on, then deflation is the only way out.

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