Banks withdraw Rs 60k cr from MFs to fund telcos

To meet the demand for credit from telecom companies to pay for third-generation licences, banks withdraw Rs 59,594 crore from mutual funds (MFs) during the fortnight ended June 4.

According to latest data from the Reserve Bank of India (RBI), banks’ investment in MFs stood at Rs 50,563 crore at the end of June 4, against Rs 1,10,157 crore at the end of May 21.

Bankers said as deposit mobilisation had been lower on an incremental basis, they had to withdraw from MFs to meet the demand for credit. During the fortnight ended June 4, deposits grew Rs 15,081 crore.

On a year-on-year basis, the growth was 14.33 per cent against the central bank’s projection of 18 per cent for this financial year.

Banks also withdrew funds from government bonds. Their investment in government bonds dipped Rs 9,024 crore during the fortnight. The outstanding loan investment in government securities, or instruments that can be included in the calculation of the statutory liquidity ratio, stood at Rs 14,35,703 crore at the end of June 4.

Banks’ investment in MFs is likely to fall further in the coming fortnights as they withdraw money to meet capital norms at the end of the quarter.

The total cost of acquiring 3G licences touched Rs 67,719 crore. Banks have lent a record

Rs 55,000 crore to telecom companies. Other than banks, telecom companies have accessed the overseas market, floated commercial paper and used internal accruals.

As a result of the huge demand, bank credit, including food and non-food, rose Rs 57,896 crore during the fortnight to Rs 32,88,074 crore at the end of June 4. On a year-on-year basis, it came close to RBI’s projection of 20 per cent for 2010-11. Credit grew 19.12 per cent during the end of June 4 on a year-on-year basis.