RBI alerts banks

RBI warns banks against aggressive lending after foreign currency deposits flooded liquidity

“Banks have parked money in government bonds and with RBI which is only a temporary solution in the absence of other avenues”

Liquidity surge

Banks received ₹11 lakh crore from FCNR deposits, but absorbed ₹5.5 lakh crore through swaps and bond sales

Credit risk warning

RBI fears aggressive lending could create sticky assets as banks chase returns on deposits

“Unless a bank can generate a mark-up of around 2.5% on the loan and generate a net interest margin of 3%, it does not make sense”

Retail credit gap

Retail credit growth at 16% lags total credit growth of 19% despite bank optimism

NBFC lending risk

Loans to non-banking finance companies growing faster than overall credit growth

“Loans to NBFCs are growing at a significantly higher rate”

Interest rate timing

RBI must balance liquidity absorption costs with avoiding consumption impact during festival season

“While there may be a broad unanimity among MPC members about raising interest rate, particularly after the rate increase by the US Fed, they have to decide on the timing so as not to impact consumption at the start of the festival season”