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GDP numbers indicate slowdown in growth engines, says CII, IBA

The optimistic expectation mainly owes to three factors, namely external financial linkages, Funding Liquidity Index, and Cost of Funds Index.

Published: 09th December 2019 05:32 AM  |   Last Updated: 09th December 2019 12:03 PM   |  A+A-

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For representational purposes. (File | EPS)

By Express News Service

The CII-IBA Financial Conditions Index for the third quarter of the current fiscal has recorded an index value of 68.9, showcasing an overall optimism for the fourth time in a row; but, the second quarter data shows a slowdown in the economy, said a joint statement by Confederation of Indian Industry (CII) and Indian Banks’ Association (IBA).

“With external benchmark lending rate effective from October, banks have transmitted the lower rate to customers and also offered several festive season discounts for several loan products. However, second quarter GDP numbers has also indicated slowdown in growth engines,” said V G Kannan, chief executive, IBA. The stimulus measures announced by the Centre for various sectors are expected to help in improving the investment demand in the coming quarters.

The optimistic expectation mainly owes to three factors, namely external financial linkages, Funding Liquidity Index, and Cost of Funds Index. “India has undertaken important reforms in the last few years in terms of monitoring of financial assets, and the bankruptcy process through IBC, amongst others. RBI in the recent past has been cutting down the repo rate and it is expected that further rate cut could take place in December. CII feels that along with undertaking measures to support the economy, it is equally important to focus on faster transmission of lower rates to consumers through banks for a sustainable credit flow into the economy,” said CII director general Chandrajit Banerjee.

According to the statement, among the sub-indices, the highest contribution was made by the Cost of Funds Index recording a value of 77.8.

The majority of the respondent banks and financial institutions expect the short-term interest rates (the interbank call rate and three-month bank certificate of deposit rate), and long-term interest rates (yield on 10 year goId  bond and conditions of marginal cost of funds-based lending rate) to come down, indicating improvement in the Cost of Funds Index.

The Funding Liquidity Index in the current quarter recorded a value of 72.7, which has improved marginally in comparison to the previous quarter. This index depicts the likely liquidity position in the market. “Within the Funding Liquidity Index, Mobilisation of Equity Market recorded the highest value of 86, followed by the Issuance in Corporate Bond Market, which registered a value of 80.

The Mobilisation in Money Market was recorded at 64, while the Liquidity Adjustment Facility registered a value of 61,” the statement added.



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