Advertisement

HindustanTimes Fri,11 Jul 2014

Banks still crunched for liquidity despite lifelines

HT Correspondent, Hindustan Times  Mumbai, November 10, 2008
First Published: 20:46 IST(10/11/2008) | Last Updated: 21:49 IST(10/11/2008)

A shortage of funds evidently persists in the country, notwithstanding all the liquidity easing measures so far. Sixteen banks on Monday borrowed a total of Rs. 12,435 crore for a day from the Reserve Bank of India (RBI) — a significant figure considering that liquidity was more than adequate last week.

Advertisement

Banks were till last week parking around Rs. 30,000 crore with the RBI after liquidity infusions flushed the system with a little in excess of the funds-availability gap.

During the whole of past week, some banks were still borrowing in the inter-bank market one-year money at double-digit rates, despite the aggressive rate cuts on November 1. After the recent cuts in the ratio of deposits that banks are required to set aside (cash reserve ratio or CRR) and to invest in government bonds, infusion of fresh liquidity had eased over the past month to Rs. 2,80,000 crore.

As a result, funds flow to borrowers — both individual and corporate — still remains controlled, restricted to sanctioned loans for home purchases by individuals and for working capital needs of companies.

“Banks are meeting the sanctioned working capital needs of companies. When it comes to fresh sanctions for longer-term needs of sectors like infrastructure, banks will certainly take into account any asset-liability mismatches,” said NS Venkatesh, MD&CEO of IDBI Gilts, a primary dealer in government securities.

Also, interest rates on loans for companies continue to be higher despite the recent 75 basis points reduction in benchmark rates by reluctant public sector banks, on the directives of the government. Private sector banks have so far not reduced their benchmark interest rates.

ICICI Bank’s home finance subsidiary, ICICI Home Finance, Monday raised its deposit rates to 11.15 per cent for 15-30 months, signifying that lending rates would continue to remain at the current elevated levels. ICICI Home Finance provides loans above Rs. 20 lakh; loans up to Rs. 20 lakh, which qualify as priority sector loans, are provided by ICICI Bank.


Advertisement
more from Banking

CCEA gives nod for IDFs to take over bank loans

In a move that could boost the cash-starved infrastruc­ture sector, the Cabinet Committee on Economic Affairs on Tuesday gave its clearance for infrastructure debt funds (IDFs) to take over existing bank loans.
markets
Advertisement
Most Popular
Advertisement
Advertisement
Copyright © 2014 HT Media Limited. All Rights Reserved