Letter to BS: Banking scenario with deposit erosions will impact liquidity

Unlike public sector banks, private banks adopt a less flexible approach for market survival, as there is no infusion of capital by the government

This refers to “Prospects of floating lending rate, fixed deposits spook bankers” (August 21). All commercial financial institutions including banks are backed by five parameters, namely, capital adequacy, functional stability, market competition, costs and profits. Banks, in particular, have to function with adequate caution to prevent capital erosion, protect market image and retain customer confidence. In this context, a large portion of bank custom traditionally comprises retail depositors who invest for daily operational savings bank accounts or time deposits. Corporate deposits show only an artificial growth with higher cost of deposit. They have less  time frame as they adopt a