Financial institutions expect improvement in economy in Q2: Survey

Financial institutions, including banks and non-banking financial companies (NBFCs), are pretty optimistic about improvement in the financial conditions in the overall economy due to the GST implementation and initiation of the insolvency process to tackle bad loans, a survey said on Tuesday.

"There seems to be substantial optimism across most of the sub-indices leading to improvement in the Financial Conditions Index in this quarter as compared to previous quarter," said the Confederation of Indian Industry-Indian Banks' Association (CII-IBA) Financial Conditions Index for Q2 2017-18.

A total of 29 banks and financial institutions participated in the survey including 11 public sector banks, 5 private sector banks, 4 foreign banks and 2 cooperative banks. Representing other financial institutions, 7 leading NBFCs participated in the survey with a combined total assets of over Rs 58 lakh crore.

The CII-IBA Financial Conditions Index for Q2 2017-18 recorded a substantial change from 56.9 in the first quarter to 71.4 in the current quarter owing to expectation of improvement in the overall financial conditions in the economy.

Releasing the Index for the second quarter of 2017-18, CII Director General Chandrajit Banerjee said: "Goods and Services Tax (GST) is one of India's most significant and ambitious reforms ever attempted and it is believed that the positive impact of GST on Indian economy is going to be significant.

"Apart from the GST, implementation of various reform measures by the government including promulgation of amendment to the Banking Regulation Act giving special powers to Reserve Bank of India (RBI) to tackle bad loans has raised the expectations of substantial improvement in the financial conditions".

Rajeev Rishi, Chairman, IBA and Chairman and Managing Director, Central Bank of India said: "Overall optimism on the impact of several reforms initiated by the government, be it the special ordinance for the resolution of NPAs or GST augur well for the economy which is reflected in the Index position at 71.4. Even better reading of sub-indices of cost of funds and funding liquidity reinforces the fact that the credit is available at a much lower cost than before."

"Among the sub-indices, the cost of Funds Index has recorded the highest level (77.6) followed by Funding Liquidity Index (72), External Financial Linkages Index (68.1) and Economic Activity Index (68.1)," a joint statement from CII and IBA said.

--IANS

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