Why the Liquidity crisis in India?


Why the Liquidity crisis in India?

We are after all not extending credit, NPAs are up only by 1-1.5% at most banks, and we have already released 3 Lac crores ( INR 3 Trillion) thru cuts in CRR, SLR and changes in regulation on secured collateral borrowings. Corporates may be squeezed but where have the interbank market funds gone, as banks are seeing a steady decline in the amounts they have in cash, without any linked repatriation or credit offtake. I think at the maximum only INR 1 Trillion ( tops) would have been reduction in deposits! One component which shd be not all the answer, would be the purchase of Dollars by RBI to shore up the falling rupee.

There is going to be a further CRR cut before December, commentators indicating as much as 150 points, but I think someone should think about getting more out of the SLR which is a largish 25% , 23% with all the current cuts effected and which should provide liquidity against a long stated grouse of the global players.

Banks are thus sitting on a lot of money but with recession prospects firming up in each sector, it is unlikely that credit will roll out anytime soon. A lot of the money should be expected in high yield junk investments yet again and that will remain a matter of concern.

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About zyakaira

Investment Banker, 40s, Bangalore This Biopic and this web recreates how one point of view, one person can impact a tremendous economic engine that the world thrives and mis-thrives on. This one has the knowledge and the civil sense , the art of conversation and some good writing to mentor others as powerful and help global managers develop and fine tune their approach on US markets, China, India and the world. Read on here, and let me know what you need. It can be a race for TRPs, a race for new markets and a race to do what is right. I have the pulse of the crisis, the recovery and the market direction and can help you build and refine your strategy as i have helped thousands of managers and multiple global corporations. Of course, it’s more fun if you talk to me. I am in favor of leading this moving of the economic crisis and will partner with you in a soft and subtle way, just the way we both ride to the top. But you can write with us, opine and just reply with aplomb and shine on Twitter , 4 square , Facebook and any other social “choupal” of choice via zyaadakairaada Profile & Portfolio - SocialPicks Different flavours at: http://benchilibowl.wordpress.com http://zyaada.mp

Posted on November 2, 2008, in Bank Stocks, Global, India, Uncategorized and tagged , , , , , , , , . Bookmark the permalink. 1 Comment.

  1. also to note, $12.5 billion withdrawn by the overseas investors till October end, november first week are back at the cost they were probably invested in !

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