In an effort to raise affordable resources, IDBI Bank will step up recourse to refinance facility provided by financial institutions like Small Industries Development Bank of India (Sidbi). It intends to avail refinance worth Rs 2,000 crore till March 2011.
“Instead of borrowing in market at higher rate (the liquidity crunch has pushed rate for short-term funds), it makes sense to tap refinance facility against the existing loan portfolio,” said P Sitaram, chief financial officer of IDBI Bank.
The refinance assistance does not attract statutory liquidity ratio and cash reserve ratio norms. It also helps to address asset liability mismatch.
Sitaram added: IDBI has low share of current account and savings accounts (Casa) deposits since it was converted into commercial bank from development financial institution about six years ago. This frequently raises asset liability mismatch challenge.
IDBI Bank deposits increased to Rs 1,54,305 crore from Rs 1,30,677 crore a year ago. Casa share stood at 15.26 per cent of total deposits.
Bank aims to raise share of Casa to 20 per cent by March 2011. For most of commercial banks Casa ratio is above 30 per cent. It could be as high as 50 per cent in certain banks.
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With liquidity under pressure in the first half ended September 2010, some banks, facing severe resource strain increased their recourse to refinance facility provided financial institutions like National Housing Bank and Sidbi.
According to Reserve Bank of India data, banks received total gross accommodation of Rs 15,300 crore in the first half of 2010-11. Banks had repaid Rs 3,332 crore to these financial institutions. Sidbi and NHB, Nabard and EXIM Bank operate refinance window.
The Reserve Bank of India keeping liquidity under leash, and system witnessed a tardy deposit growth in April-September period. As a consequence, banks raised the frequency of using refinance windows and the liquidity adjustment facility for managing mismatches.
National Housing Bank data show banks availed refinance to the tune of Rs 2,045 crore in April-June 2010. Last year, in same period, the demand was much less.