Letter to BS: Banks face 'mismatch risk' between their assets, liabilities

The column “Why monetary transmission is not easy in India” (May 29) by Hasmukh Adhia was worth reading. The writer has identified a number of reasons for ineffective monetary policy transmission. The journey to bring in different yardsticks such as prime lending rate to benchmark prime lending rate and from base rate to marginal cost of funds based lending rate, has not facilitated the desired level of transmission so far. Besides the reasons narrated by the writer that are posing hurdles in effective transmission of monetary policy, one major risk that banks face is the “mismatch risk” — between its assets and liabilities. The writer is correct in saying there is a need to address the inherent compulsions that stop banks from passing on rate cut benefits to borrowers.

Saagar Soni  Gandhinagar

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