Borrowings other than interbank and reserve Bank of India According to the latest RBI data, various types of bonds raised from the market essentially doubled to Rs 4.95 lakh crore in early September from Rs 2.43 lakh crore a year ago.
Strong loan requisition RBI has pushed the incremental debt deposit ratio to 111 per cent by September 9, RBI data indicate credit growth touched a multi-year high of 16.2 per cent till September 9, while deposits grew by only 9.5 per cent . This implies that the new loans given by commercial banks so far in the current financial year are more than the new deposits raised by banks to fund them.
The outstanding credit deposit ratio at the system level is 73.66%. Factoring in the 18 percent statutory liquidity ratio, which mandates banks to park 18 percent of their deposits in government bonds, and 4.5 percent in the cash reserve ratio, which prescribes a 4.5 percent parking with cash funds. reserve Bank of IndiaThe pressure on core funds is clear.
This is putting pressure on banks to focus on non-deposit resources to meet credit demand, as corporates are coming back to banks to meet their working capital needs amid rising capital expenditure. At the same time, the retail loan books are also increasing continuously. “Banks are eligible to borrow from the market to meet the credit demand,” the CEO of a private bank, requesting anonymity, said.
“Amid rising credit demand, not all funds raised by banks through bonds are used to meet capital requirements as too much clean-up in bad loans at the system level has reduced the need for risk weighted capital. “. Banks also raise funds to meet the growing capital adequacy requirement amid their growing loan books.
But a portion of the bond raising is believed to be used to meet the demand for loans. “Part of the increase in lending can be attributed to rising credit demand by banks,” said Anil Gupta, vice-president, financial sector ratings. execution, “Some bonds like infrastructure bonds can be used for infra loans or affordable housing.”
But as a strategy, banks cannot rely on such funding consistently as they can impact profit margins. “Banks will have to look at raising more deposits, there could be pressure on deposit and lending rates. “Long-term bonds are more expensive. Gupta said if the rates go down within a short period of time after the bond issuance, the margins of the respective banks could be put under pressure.
The Reserve Bank is expected to hike repo rates by 50 basis points when the Monetary Policy Committee meeting this week is expected to prompt banks to raise rates. With most deposit returns of banks being negative in real terms, banks may be forced to aggressively transmit rates to depositors, which is 17 bps (a basis point 0.01 per cent), compared with 29 lenders. Much less than that sent to. Till now BPS