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Gains from deposit surge limited for banks: ICRA

IANS  |  Chennai 

Credit rating agency Ltd on Tuesday said the gains for the sector and others owing to sudden surge in post of 500/1,000 rupee notes will be limited with RBI increasing the reserve ratio (CRR).

The Reserve Bank of India (RBI) on Saturday levied additional CRR for banks at 100 per cent on the increase in net demand and time liabilities (NDTL) between September 16, 2016 and November 11, 2016, thereby sucking out the surplus liquidity in the system.

According to ICRA, the additional CRR to be kept with RBI between the RBI specified dates stands at Rs 3.38 lakh crore.

said banks were making some positive spread on the garnered even by offering them under R-Repo window. But the gains will be largely offset by the RBI's move to increase CRR as the banks will not earn anything on that.

"estimates that due to above changes, the banks will lose Rs 700-900 crore every fortnight till such time the RBI reverses its temporary measure," it said.

According to the rating agency, the RBI's decision has also negated the possibilities of lowering its cost of fund.

"Consequently, banks may take a pause on monetary transmission as they await further directions from the regulator," ICRA said.

ICRA said the yields on the 10-Year G-Sec have incidentally increased to over 6.4 per cent on November 29, 2016 as against a low of 6.19 per cent witnessed on November 24, 2016



(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, November 29 2016. 17:22 IST