In the Q1, the Indian economy will increase the cost of funding: CII-IBA

Business | IANS | Published :

New Delhi, May 21: The Indian economy is willing to improve in the overall conditions of the first quarter due to good external relations and domestic economic activity and both domestic economic activity. CII-IBA Financial Conditions Index Q1 (April-June) 56.9 percent reflects a positive perspective in the overall economic situation in the Indian economy compared to last financial quarter (48). External Financial Linkages, Financing Liquidity Index and Economic Activity Index, and Economic Activity Index are the economic conditions in the economy.

The Confederation of Indian Industry (CII)-Indian Banks Association (IBA) joint survey of 31 banks and financial institutions, however, also anticipates the cost of funds to rise due to tightening of liquidity in the near future. "The Cost of Funds Index with a standing at 40.3 witnessed deterioration from 66 in the previous quarter. Majority of the respondents expected increase in the interest rate," CII said. "The improvement of Financial Conditions Index projects overall optimism in the Indian financial sector on the back of increase in consumption, infrastructure spending amplified by slew of landmark reforms as evidenced by roll out of GST and formulation of the stressed loans resolution package through an ordinance by amending the Banking Regulation Act," CII Director General Chandrajit Banerjee said.

The Reserve Bank of India has recently been empowered to issue directions to commercial banks to initiate insolvency proceedings for recovering bad loans. The non-performing assets (NPAs), or bad loans, of state-run banks at the end of last September rose to Rs 6.3 lakh crore (almost $100 billion), as compared to Rs 5.5 lakh crore at the end of June 2016. The 31 major banks and financial institutions surveyed have combined total assets of more than Rs 60 lakh crore. The industry body's survey said the marginal cost of funds lending rates (MCLR) have seen minimal reduction across banks even though there is surplus liquidity in the market and rate cuts on deposits.

The external financial linkages index was recorded at 59.3, the second highest value among the sub-indices, registering significant improvement from the previous quarter (35.3), that shows the Indian financial sector remained "unperturbed" from the effects of the US Federal Reserve's latest interest rate hike, CII said. The funding liquidity index was recorded at 72.2, third highest value among the sub-indices, recording improvement from the previous quarter (59.3), it added.

This figure is significantly higher than 50 mark, indicating a stronger estimate of funding for liquidity in the Indian economy. "The liquidity situation is convenient and banks indicate that the liquidity index indicates the maximum level of Index, which is in a position to create credit for the productive and required sectors, "Indian Banks Association Chairman Rajiv Rishi said.

In the Q1, the Indian economy will increase the cost of funding: CII-IBA

Categories

Quick Links