To,

The governor, reserve bank of India.

Counter Proposal Regarding the notification(RPCD.No.PLFS.BC.129/05.02.27/17-18) issued by

RBI on Credit Growth and Increase of Interest.
IN RESPONSE TO THE GOVERNMENT NOTIFICATION REGARDING GROWTH IN
INTEREST RATE

This is a counter proposal by the group of Dena banks regarding the government notification
(RPCD.No.PLFS.BC.129/05.02.27/17-18) that proposed a change in the earlier interest rate,
which was 6.25% and which is proposed to be increased to 10.25% for business man, corporate
firms and service sectors and reduced to be 5.25% for farmers, agricultural activities and other
individuals.

PROPOSALS BY THE FOREIGN BANKS

That the earlier rate of interest should be increased by 2 .5% and not 4 %, thus raising it
to 9 % for the business man, corporate firms and service sectors
That the reduced rate of 5.25% should be applicable only to the farmers and agricultural
activities and not other individuals.
That the rate of interest for small scale industries and one person companies should not
be increased by a rate more than 1 %

Reasoning behind the proposal

Moreover the interest rate for the business men and industrialist should be increased so
that more money can be generated from them in the form of an interest which later can be
used for the economic growth of the country and lowering down the interest rates for the
farmers could save the farmers with existing bank overdrafts and loans thousands of
rupees. For those farmers trying to recover from drought, this reduced interest rate means
their decision to refinance governments scheme, it a substantial saving and real benefit
to people. Our farmers contribute about 58 billion to our nations economy. Stronger
farm businesses mean a stronger economy. Supporting viable farm businesses to better
manage through drought and hardship is firmly in our interest.
1) supporting the above statement of RBI in its notification. Dena bank accepts the proposal of
RBI given in notification(RPCD.No.PLFS.BC.129/05.02.27/17-18) to reduce the intrest rates on
credit by 5.25% for farmers, agricultural activities and other individuals.

2) Dena bank almost has even though has more no. of branches in urban than rural areas, the
majority no. of clients (consumers) are corporate bodies and medium enterprises therefore if the
intrest rates are spiked by 4% , consumers will no way show intrest towards the bank and there
by dena bank which in no profit no loss condition goes into losses by loosing its customers.

35000
30000
25000
20000
15000 Series 1
10000
Series 2
5000
0
Series 2
large industries
MSME Series 1
retail
agriculture
others

The above shown chart shows the credit growth in different sectors. Series 1. In the graph shows
the statics of year 2014-2015 and series 2. Shows the statics of the year 2015-2016.
During the year 2015-16, Bank has opened 107 new Branches (including upgradation of three Satellite
Office in to full- fledged branches) taking the tally to 1,846 Branches spread across length and breadth of
the country. The sector-wise breakup of the branch network of the Bank as on 31st March 2016 is as
under:

The table mentioned below shows the sector wise breakup of the branch network of the bank as
on 31st march 2016

SECTOR NO. OF BRANCHES % TO TOTAL

RURAL 706 38
SEMI URBAN 403 22
URBAN 356 19
METRO 381 21
TOTAL 1,846 100

Thus, it is humbly elucidated that the major consumer to the dena banks are the corporate houses,
businessmen and the service sector as a whole. Juxtaposing this fact in the light of the present
RBI notification, we can clearly infer that our major consumer base shall be hampered. Also, we
lack agricultural investment to balance up that economic slump which shall be caused by the
hike in the interest rate for the said class of borrowers.

NAME OF THE STUDENT : MALAVIKA GANTA

ROLL:2013047