Liquidity conditions in Indian banking system likely to improve sharply from January 2024: Ind-Ra
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India ratings and research (Ind-Ra) in its latest report has said that the liquidity conditions in the Indian banking system are expected to improve in a meaningful way from January 2024, owing to a surge in government spending ahead of the vote on account.
According to the report, foreign portfolio investment (FPI) flows in the equity market have surged in December. Therefore, it said the lumpy government spending and improvement in the balance of payment account will cause a sharp improvement in banking system liquidity.
Ind-Ra highlighted that the number of issuances in the primary commercial paper (CP) market increased in November 2023 in terms of both value and number of issuers, largely driven by the need for higher balance sheet liquidity throughout the year. It opined that CP issuances will stay healthy in the remaining part of the fiscal. It said overall, month-on-month CP issuances will show moderate growth incrementally. It added that the Reserve Bank of India’s (RBI) recent move to increase the risk weight on consumer credit of commercial banks and non-banking financial companies (NBFCs) would push NBFCs to incremental.
