Banks’ borrowings touch 8-month high of ₹5.05 lakh crore as of Jun 16
Bank loans touched an eight-month high of INR 5.05 crore as of June 16, the highest level since October 21, according to data in the RBI’s weekly bulletin.
Market participants said the increase is expected to be driven by banks’ short-term funding requirements due to advance quarterly tax payments.
The data, which is tracked every two weeks, reflects short-term money market borrowings by banks in the form of interbank repurchases and three-party repurchases.
Tight liquidity conditions sent money market prices higher in June, driving up banks’ borrowing costs. However, the strong demand for credit, especially short-term loans, amid the delay in deposit growth, has ensured an increase in the need for banks and their reliance on short-term fund-raising over the past year to manage assets and liabilities.
As per the latest data, Bank Credit Outstanding stood at INR 140.23 crore as of June 16, up by 15.4 percent YoY, while Bank Deposits were at INR 185.7 Crore, up by 12.1 percent YoY.
Outstanding market loans to scheduled commercial banks rose to ₹4.6 crore as of March 2023 from ₹2.7 crore a year earlier. Bank loans crossed the INR five crore threshold for the first time in September 2022.
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The loans also include securities such as Additional Tier 1 and Infrastructure Bonds, which saw a spike in issuance from mid-June onwards. Kotak Mahindra Bank raised Rs 1,895 crore via AT-1 bond on June 22. More banks led by State Bank of India are expected to tap into the market via AT1 bonds in the coming weeks, which is likely to increase bank lending, participants said.
On June 8, the central bank allowed banks to set their own limits for financial loans on call and notice, in addition to the existing facilities available for term financial loans. This step was taken with the aim of allowing more flexibility and helping banks to better manage liquidity requirements, and is expected to support banks’ borrowing in the market in the future.