Reserve Bank Deputy Governor K C Chakrabarty has called for an encore of the mobile revolution in the banking space and said if banks adopt technology appropriately, it can easily be done.
"If technology is adopted appropriately, banks can also do a mobile-like revolution. But what worries me is that it is not happening as yet," the senior-most deputy governor overseeing banking supervision, rural credit and customer service at the RBI told PTI in an exclusive interview here.
He was answering to a query on why the central bank is repeatedly asking banks to bring down their net interest margins at a time when banks are mostly rated on the basis of their NIMS.
"We are not asking the banks to sacrifice their profits or return on equity. What we want them is to bring down their cost of operations by bringing in technology and then charge less from customers," he said and pointed out that wherever technology has been used massively, the price has come down.
With an average NIM of 3-3.5 per cent, the RBI feels that it is one of the highest in the world and wants banks to bring it down by offering higher deposit rates and lower lending rates. In developed markets, the NIMS is usually very low and ranges between 1 and 2 per cent.
Net interest margin, or NIM, is the difference between the interest a bank earns from it assets and the interest it pays on its deposits or liabilities. The higher, the difference between the two the higher will be the NIM.
As a first step toward this, in its May 3 annual monetary policy, RBI raised the interest rate on savings deposits by 50 basis points to 4 per cent. Though fixed deposits attract close to 10 per cent, the average lending rate is around 15 per cent.
But when queried how far technology can make services cheaper as the cost of technology is also on the rise by the day, he quipped, "It simply means that you don't understand technology. People who say tech is costly are those who do not understand it in the real sense.
"A technology is that which can be used to serve the masses. Look at how telecom technology has changed the world. When cable was introduced between London and New York
If banks have used technology appropriately, their costs would come down and customers would get funds at lower rate of interest and services at lower charges, he said and wondered, "If it can happen in every other area, why not in banking, I don't understand."
He further argued that if the cost per unit is going up for banking technology products, the volume will be so high that the overall cost of delivery can be brought down much lower from the present high levels, he concluded.
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