The data published by the Reserve Bank of India (RBI) on outstanding credit and deposits of scheduled commercial banks include principal and interest. Banks calculate the interest following the accrual principle. Besides, what has accrued on bank credit but not yet due for payment, there is interest attributable to non-performing assets. A year-on-year comparison is usually done in reviewing the trends in credit and deposits. It is vitiated by the fact that a rise in interest may account for a substantial proportion of the change. Unfortunately, the return prescribed under Section 42 of the RBI Act, 1934, does not provide for a separate reporting of principal and interest on domestic business, although it is available for foreign currency liabilities and assets. It may require an amendment of the Act to get the bifurcation of the total into principal and interest for domestic business but it should not be difficult since there will no objection from the Opposition to set right a technical problem. In the meantime, the RBI should examine the various other returns from the banking system to see whether there is any way of segregating the interest element from the total figures and publishing them.
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A Seshan Mumbai
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number