It’s time for @RBI to introspect on cost-benefit of economic stimulus through liquidity injection (part of ₹2 Trillion fiscal stimulus package) by purchases of Gilts, USD/INR, LTRO/TLTRO and CRR cut (combined cost of liquidity for banks at 4-5%) and getting back ₹6-7T at 3.35%
How to stop the reverse flow of over ₹6 Trillion and to put them to effective & intended use within the system and to avoid neutralisation of built-up assets in @RBI balance sheet? It’s not easy when lenders are risk-averse but most see as being pushed to the corner for lending!
But it’s not good enough when extension need to go beyond ₹6T of reverse flow into repo of excess SLR portfolio which @RBI could lend cheap bringing Repo rate down at 3.50%; so, there’s cash and eager to see how @RBI @FinMinIndia to put these to work for credit & investments!
Focus will be on Big3 PSU banks (SBI/BOB/PNB) and Big3 of private banks (ICICI/HDFC/Axis) that need to take major load, giving NII advantage for higher profits, subject to control over credit cost! This could be positive set up on #banknifty going forward!? Need quick resolution!
Resolution obviously can’t be from R/R rate cut to 3% or putting cap on reverse flow pushing call & short term MM rates to 0.1-3%, (10Y yield into 5.50-5.65%) which would be big blow for banks on NII!
Need out of the box thinking from Mint Street & North block! Fingers crossed!
Need out of the box thinking from Mint Street & North block! Fingers crossed!
