The banking system has invested its short-term surpluses in medium and long term assets which has led to a huge asset liability mismatch. This structural imbalance could push up interest rates in the call money market.
This was suggested by P G Kakodkar, chairman, Discount and Finance House of India (DFHI) while announcing the results for the year 1996-97. DFHI has posted a net profit of Rs 55.16 crore in the financial year 1996-97. DFHI has recommended a 14 per cent dividend. The net profit of DFHI has registered a 75 per cent increase from Rs 31.14 crore in 1995-96.
Kakodkar suggested that Reserve Bank of India (RBI) should consider providing under special circumstances a discount window for commercial banks in difficulties on the lines of what is done by the Federal Reserve in the US. He also suggested that to take care of situations of acute scarcity of funds, RBI could consider injecting liquidity through the reverse repo route reasonable rates.
Commenting on the present environment, SK Mukherjee, managing director, DFHI, said that many players have linked the decline in the short term rates with long term rates.
In reply to a question why DFHIs presence in the government dated securities segment was negligible, Mukherjee said that the focus of his organisation was to concentrate on treasury bills and short term paper.
Recognising the need to seek new directions and policy initiatives, upgrade risk management strategies and strengthen its systems and procedures, the DFHI has engaged the services of a chartered accountants firm to undertake a detailed study, said Kakodkar.
Commenting on the performance of DFHI in the current financial year, he said that in the first five months of 1997-98, the turnover in treasury bills and government securities was substantially higher than in the corresponding period of the preceding year.
