Whopping increase in bank liabilities and southward movement in non-food credit disbursement during the first quarter of the current fiscal is keeping the bank heads worried.
Aggregate deposits have galloped to over Rs 10,000 crore between April 1 and June 23. Non-food credit shrunk by over Rs 800 crore the same period. Non-deployment of liabilities coupled with fast expansion is threatening to make a reverse asset-liability mis-match for banks. With inter-bank call rates at single digit levels for the past several months and an overbought SLR securities portfolio leaves little room for treasury manoeuvering for banks.
Non-food credit came down by Rs 2,150 cro re to Rs 2,68,105 crore during the fortnight-ending May 23. Since April 1 to June 23, non-food credit dipped by Rs 828 crore.
As against this, the liabilities of the bank has spiraled upwards. The aggregate bank deposits went up by Rs 1,640 crore to Rs 5,13,675 crore till June 23, further increase in deposits since April 1 is Rs 10,080 crore.
Corporates are shying away from apprising their advances and are not availing credit, despite the relaxation of maximum permissible bank finance (MPBF) by the Reserve Bank of India in its monetary policy announced in April, said Union Bank of India chairman and managing director A T Pannirselvam in Mumbai on June 20. Dip seen in commercial credit during the first 3 months of the current year is not just in the bank's portfolio but also for the financial institutions. Deployment of deposits raised, is indeed a serious problem as banks will not be able to sustain its bottom line with any further cuts in prime lending rates. There are no signs of credit offtake over the next 3 monthse, he said.
As a result, banks are looking at other avenues for deployment of their liabilities. Investment has largely been in gilts. Besides, commercial papers, inland and foreign bills are other investment avenues looked by banks.
Investment in government securities went up by Rs 841 crore to Rs 1,69,498 crore till May 23 and it accounted for Rs 10,469 crore during April 1 to May 23. Though investment in inland bills discounting went down by Rs 4 crore to Rs 9,184 crore on May 23, however, the inland bill discounting transactions have increased by a healthy Rs 698 crore during the first eight weeks of the current fiscal .
Corporates have raised more than Rs 1000 crore of short term funds through the commercial paper (CP) route. This is because interest rates are substantially lower than even the prime rates. During the period May 15 to May 31, CPs amounting to Rs 311 crore were issued at interest rates in the region of 8.5 per cent to 11.1 per cent - taking the total CPs issued to Rs 1,050 crore between April 1 to May 31 period.
Meanwhile, foreign currency assets of the Reserve bank of India increased by $97 million to $24.26 billion till June 6. However, gold reserves of the country fell by $12 million to $3.95 billion. As a result the foreign exchange reserves has increased by $85 million to $28.21 billion as there was no change in SDRs, which stood at $3 million as on June 6.
