Some banks extending long-term loans below bond market rates, warns SBI

It's time the RBI allowed the rupee to appreciate, says an SBI Research report

The Reserve Bank of India’s intervention in the currency market and other measures have created so much liquidity in the system that some banks are extending long-term loans to corporate entities below bond market rates, even repo rate – that is unsustainable – State Bank of India’s (SBI’s) economic research unit has warned.

Stating the issue as a 'peculiar conundrum’, State Bank of India (SBI) Group Chief Economic Advisor Soumya Kanti Ghosh wrote in his report that even some 15-year-old bank loans were given at a negative spread of 60-70 basis points over equivalent rated corporate bonds.

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