3 rule? i. e. pay 3 % interest on deposits charge 6 % interest on loans and head for the golf course at 3. because there is grain of truth in this, i would say that perhaps they may manage to earn some profits but they would certainly not remain competitive. banks would need to think of partnerships and strategies that were previously unthinkable – and perhaps still so – but these would need to be tackled. for example, investment banking may have been thought of as being unreasonably volatile but it may now be the need of the corporate customer. • banks need to develop more efficient credit delivery mechanisms and this should form part of its repositioning strategy. • banking data reveals concentration of banking business in urban / metro areas, with the top ten centres accounting for roughly 70 % of banking business i. e. potential of rural / semi - urban areas remain relatively untapped. i may be naive, but what beats me is the high spreads between the formal and informal sector lending rates in the rural areas. is cheese for the money lender not cheese for a bank? • banking can forge and nurture appropriate public - private partnerships for development of micro finance activities. • smes have been a neglected segment of bank lending – year on year growth in the ssi segment has been barely 5 % as compared to 19 % growth in total lending. it may interest you to know that in its search for improving profitability, a large japanese bank introduced a product called “ uncollateralised business select loan ” aimed at small businesses in 2002. it has been stated that this business generated net margins of 2 % - 2. 5 % compared with the net corporate lending margins of 0. 8 % - 1. 1 %. for this, instead of relying on collateral, the bank developed a new credit scoring system and new methods of measuring default and counterparty risk as also new marketing methods. • securitisation will enable banks to target profit growth from asset turnover based business rather than the balance sheet. • it is stated that non interest income accounts for nearly half of all operating income generated by us commercial banks. in india, it is less than one - fifth. while there is scope for increasing fee based income through non - traditional services, studies in the us suggest that increased reliance on fee based activities tends to increase rather than decrease the volatility of banks ’ earnings stream. i am aware that the issues raised are neither new nor profound but if something

. 22. the rbi has acted pro - actively and promptly and taken multi - directional measures to infuse liquidity into the indian system so as to ensure availability of credit to the productive sectors of the economy and thereby, maintaining financial stability. while the package of measures has had some positive effect, the challenges still remain as the global uncertainties continue to persist. the reserve bank will continue to closely monitor the developments in the global and domestic financial markets and will take swift and effective action as appropriate. the bankers too, on their part, mindful of the needs of their customers, have recently reduced their lending rates and it is expected to have a salutary effect on the credit off take in the system. conclusion 23. these are challenging times for all of us and we need to be watchful of the unfolding developments. while the temporary counter - cyclical measures taken by the rbi are as per the need of the hour, it has to be borne in mind that the measures are ad hoc in nature in response to a particular situation. the banks would, therefore be well advised to ensure that their business strategies and decisions are guided by the longer - term perspective of the systemic and macroeconomic developments and are not unduly influenced by the current episode of the exceptional events. since the banks would have a key role in successfully countering the adverse impact of the recent developments, their continued safety & soundness and financial health would be of utmost importance – for the banks, for their customers as well as for the public policy authorities from a systemic perspective. i am sure, the banking community would rise to the occasion and measure equal to the task in effectively responding to the challenges ahead, through prompt action underpinned by robust pragmatism. 24. i wish the reactivated bankers club of kolkata become a vibrant platform for exchange of information and will come out with innovative ideas for taking safe banking to every nook and corner of the country. thank you for the attention.