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Liquidity is controlled by the Reserve

Bank of India (RBI).



India is a growing economy and demand

for credit is high though it could be
cyclical.

 

Licensing requirement, investment in

technology and branch network.






High during periods of tight liquidity. Trade

unions in public sector banks can be anti
reforms. Depositors may invest elsewhere
if interest rates fall.

The liquidity crisis that swept the heavyweights of global financial sector off
their feet in FY09 did affect the entities in Indian banking sector as well, albeit
marginally. Other than the temporary crunch after bankruptcy of Lehman
Brothers, the global financial meltdown was weathered by banks in India with
relative ease. The monetary stimuli (reduction in repo rate, cash reserve ratio
(CRR) and statutory liquidity ratio (SLR)) offered to the banks by the RBI
made things easier. Despite the severe liquidity pressure and poor credit
appetite at the retail and corporate levels, Indian banks managed to grow
their advances and deposits by 24% YoY and 22% YoY respectively in FY09.
The growth was mainly driven by a sharp expansion in term deposits and
growth in agricultural and large corporate credit. Having said that, higher
delinquency levels in retail credit and debt restructuring took its toll on the
sector. Repo rate 4.75%, RRR 3.25%, CRR 5.5% recently.

 
 
  
 

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