The country's financial sector has showcased optimism for the second time in a row in the first quarter of the current financial year.
The CII-IBA Financial Conditions Index for April-June 2019 recorded an index value of 68.1, showcasing an overall optimism. In the fourth quarter of 2018-19, the Financial Condition Index was 62.9.
According to CII Director-General Chandrajit Banerjee, the continuation of above 50 score of the Financial Conditions Index augurs well for the country's financial sector.
"Considering the liquidity crunch in the financial sector, particularly faced by NBFCs (non-banking financial companies) in the past few months, it is quite heartening to see the expectation of improvement in the cost of funds index and liquidity funds index," Banerjee said.
The optimistic expectation comes mainly due to continued improvement in factors namely external financial linkages (81), funding liquidity index (71.2), economic activity index (52.7) and cost of funds index (67.4).
Indian Banks' Association (IBA) Chief Executive Officer V G Kannan said, "Impressive reading of external financial linkage at 81 indicates that the country is an attractive destination for external flows at this point of time."
In the survey for the index, a total of 23 entities participated including seven state-owned banks, six private sector banks, two foreign banks and one cooperative bank. Seven NBFCs also participated in the survey.
Banerjee said the index value is expected to maintain its optimistic course in the coming quarters, as the focus of the new government is expected to shift towards pushing more reforms and improving the state of the economy.
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