There are 2 major ratios one is CRR and second is SLR. To explain both of them in simple term banks have to maintain certain percentage of cash and liquid assets with rbi. Rbi recetly increased these two ratiois which means banks have to maintain more money with rbi.
Since inflation is hight cost of goods is high and rbi increaseing repo rates is sucking liquidity out. In simple terms people withdrawing money from their accounts. Banks dont have money to lend and if they dont lend they dont earn. Just read the above article it beautifully explains the problem.
Why the first point is extremely concerning is RBI is lending money at 5.4% but inter bank lending is happening at 5.64% that means banks desperately want money.
Explaing in short banks dont have money to lend and every body is raising deposit rates craizally that will put pressure on nim and resulting pressure on profits.
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