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.
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.