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Credit Demand In Festive Season: The festive season has started. Navratri festival is over and DiwaliDhanteras and Chhath festival are about to come. People shop heavily during the festive season. The same is being seen in this festive season as well. Due to which the demand for this huge loan is being seen. Due to pick-up in credit demand, spurt in consumption due to the festive season and RBI selling dollars to arrest the weakness in the rupee, the banking system is facing a liquidity crunch.
Cash crunch in banks!
The weighted average call rate has reached the highest level since April 30, 2019, which is enough to indicate that the banking system is facing a cash crunch. The weighted average call rate is 21 basis points higher than the repo rate to 6.11 per cent, which is close to the 6.15 per cent marginal standing facility. Marginal Standing Facility is the top level of RBI’s interest rate. Whenever banks take a loan from RBI under the Marginal Standing Facility, they have to pay more interest to the central bank. And banks take loans under the Marginal Standing Facility only when they face a cash crunch. On Monday, October 10, 2022, banks have taken a loan of Rs 21,000 crore from the RBI through the Marginal Standing Facility.
There was cash crunch even in September
Experts believe that the cash crisis has arisen due to RBI selling dollars, huge demand for loans during the festive season and cash balance with the government. In September, there was a cash crunch for the first time in three years, after which the RBI had to intervene.
The crisis in the demand for loans increased sharply
Banks are facing cash crunch due to huge credit demand. In such a situation, there has been increased pressure on them to raise deposit rates to raise cash. RBI had released the data on September 23, 2022, according to which the demand for loans has reached a 9-year high of 16.4 percent. Whereas the deposit growth rate has been only 9.2 percent. After which the pressure on banks to increase deposits has started increasing.
Skimpy on raising deposit rates
RBI has increased the repo rate by 190 basis points from May to September. The repo rate has increased from 4 per cent to 5.90 per cent. Whose banks have increased interest rates on loans to deposits. However, the rates on deposits have not increased at the same pace as the debt has become costlier.
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