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Banks expect liquidity to remain tight in Q4FY19: FICCI-IBA Bankers' survey
Feb-18-2019

The Federation of Indian Chambers of Commerce and the Indian Banks’ Association’s (FICCI-IBA Bankers') survey has said a majority of banks expect liquidity to remain tight in the last quarter of current financial year (Q4FY19), due to year end liquidity demands, tax outflows, higher fiscal deficit and run-up to elections, despite a slight improvement in the situation. The liquidity scenario remained in deficit in the third quarter of FY19. In order to maintain liquidity, it mentioned the banks agreed that the Reserve Bank of India (RBI) has taken adequate measures, by the way of open market operations (OMOs) and suggested that the central bank should continue OMO purchases for remaining period of the fiscal year.

Another key finding of the survey has been the changing trend in non-performing assets (NPAs), it said adding about 54% of reporting public sector banks have cited a reduction in the NPA levels. It added ‘while infrastructure continues to remain the key sector with high NPAs, with over 90% of respondents citing so’. The bankers were of the view that the recent recapitalisation plan of the government will further help in improving the balance sheets and then write-off some of their current bad loans.

Besides, it added that this is expected to improve financial health of PSBs, bring out some PSBs from the PCA (Prompt Corrective Action) framework and facilitate overall economic growth. It will help banks to extend fresh credit and thus support credit growth, especially for small and micro industries.

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