| Topic : Liquidity Risk |
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Credit Risk Management
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Activity:
1 comments
594 views
last activity : 07 06 2010 20:18:04 +0000
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I am sure all are aware of the credit crunch in today's scenario. The present credit squeeze situation is arising out of the overstretching of the deployment of bank’s resources, as evident from the credit deposit ratio of 75.16 per cent, investment deposit ratio of 28.27 per cent and cash deposit ratio of 9.89 per cent, the cumulative total of which exceeds 113 per cent of the deposits as on October 10. It is, therefore, obvious that the excess 13 per cent comes from equity and float funds.
The foreign investment outflows and drying up of funds from issue of drafts due to successful implementation of core banking projects in most of the banks ensure that the quantum of float funds that are at the disposal of the banks without attracting CRR/SLR requirements are getting reduced.
On the demand side, the ability to raise resources from the market to meet organic growth as well as developmental needs of the industry and trade is handicapped by the stock market crash, because of which demand for bank credit is on the rise. The situation may ease on account of reduction of the CRR from 9 per cent to 6.5 per cent, which will release funds to meet the demands of trade and industry.
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