SBI's Warning To Banks, It Is Important To Pay Attention To Credit And Liquidity Ratio

Amid depleting liquidity due to RBI's hike in repo rate, a report cautioned banks that assets and liabilities are not accurately assessing the inherent risk on both sides. This is being done at a time when credit demand in the country has reached a decade-high of 18 percent and deposit growth is lagging behind.

The SBI report said that the main reason for the low liquidity in the country is the increase in the interest rate by the RBI. In the last six months, the RBI has increased the interest rates by 1.90 percent to reduce inflation.

cash in the system

The report said that the average net durable liquidity of the banking system in April 2022 before the interest rate hike was Rs 8.3 lakh crore, which has now come down to close to Rs 3 lakh crore. It was further said that the government has spent a major part of the cash balance in the week of Diwali, which has resulted in some improvement. Bonuses given by the government and private sectors have also helped.

In the report, SBI Chief Economic Advisor Soumya Kanti Ghosh said that banks are also working to ease the liquidity problem by raising interest rates. Credit growth has reached an all-time high.

Decreased increase in the deposit rate

Banks increased the interest rate significantly in October. Banks have 45 percent CASA, while 55 percent are term deposits. The repo rate has been increased by 1.90 percent, while an increase of 1.05 percent has been seen in the deposit rates.