India Ratings sees banks stable in 2013
Quotes

India Ratings sees banks stable in 2013

Last Updated: Tuesday, January 22, 2013, 22:08
 
 Comment 0
 
India Ratings sees banks stable in 2013
Mumbai: India Ratings on Tuesday gave a "stable" outlook for the country's banking sector, but said lenders may face funding issues which will make passing on of lower interest rates untenable.

The funding issues will arise from the asset liability mismatches, wherein banks are carrying low tenor deposits and lending for longer duration, and due to migration to the Basel-III regulations, which require USD 45 billion by FY'18, India Ratings Senior Director Ananda Bhoumik said here on Tuesday.

Bhoumik said the banks face a "conundrum", wherein they will not be in a position to lower interest rates even if the RBI eases its policy rates.

A cut in deposit rates, which is a precursor to softening of the high lending rates, coupled with inflation staying elevated, will result in a further reduction in real interest rates and hurt the deposit rates, he said.

"From a policy perspective, the transmission of any monetary easing during 2013-14 may be diluted due to the twin impact of higher refinancing pressures on banks and slower deposit accruals in a low real interest rate regime," he said.

Bhoumik added that refinancing risk is rising majorly, especially for the state run banks and said that teh ratio of total deposits and borrowings maturing in a year are standing at an all time high of 20 percent of the total assets for the public sector banks.

The continued support being rendered by the government is a positive for the banks and underlined the need to allow them to issue infrastructure bonds, as is being mooted at present. Additionally, some banks are also tweaking their deposit profiles, he said.

Other positives which will work for the banking sector include a likely stabilisation on asset quality concerns by mid-2013, Bhoumik said.

PTI



First Published: Tuesday, January 22, 2013, 22:08


Comments


comments powered by Disqus
Hyundai 4S Fluidic Verna
Hyundai 4S Fluidic Verna
Top 5 anticipated luxury cars of 2015
Top 5 anticipated luxury cars of 2015
Top 5 anticipated smartphones of 2015
Top 5 anticipated smartphones of 2015
World Economic Forum 2015
World Economic Forum 2015
G20 Summit 2014
G20 Summit 2014

Web Wrap
Contact Us : Privacy Policy : Legal Disclaimer
Copyright © Zee Media Corporation Ltd. All rights reserved