Bank crunch is over, but lending mood not here yet | india | Hindustan Times
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Bank crunch is over, but lending mood not here yet

The country’s banks now have the cash to get back to normal — but there is no cure yet in sight for the mood of uncertainty, report HT Correspondent.

india Updated: Oct 16, 2008 21:10 IST

The country’s banks now have the cash to get back to normal — but there is no cure yet in sight for the mood of uncertainty.

A lending logjam could continue until some more clouds clear though the Reserve Bank has put in cash to make up for funds sucked out to stabilise the rupee which is weaker because foreign investors are selling shares to meet overseas fund requirements.

“The additional CRR (cash reserve ratio) cut has only taken care of the immediate liquidity gap. There is no way to estimate how the liquidity situation would be going forward,” said the chairman of a Mumbai-based public sector bank.

The uncertainty over surplus funds availability would delay the resumption of normal lending activity by banks.

Saugata Bhattacharya, vice president, business and economic research, Axis Bank, said the mood was set for an improvement in liquidity but with a caveat.

“If the global markets don't stabilise, then there will be an outflow of portfolio funds, which could lead to further erosion of liquidity,” he said.

The release of additional liquidity led to the inter-bank overnight call monetary rate to drop to below 9 per cent, after hovering around 10 per cent on the first three days of this week. Banks’ borrowings overnight borrowings from the RBI also sharply fell to Rs 10,400 crore from over Rs Rs 62,000 crore on Wednesday.