Banks using quality liquid assets to fund loan growth: RBI report

Credit growth in the system has touched a decade high, a level seen last in 2011

The decadal high credit growth amid slow deposit accretion and tight liquidity conditions have meant that banks are drawing down their high-quality liquid assets (HQLAs) to fund the demand for credit in the economy, the Reserve Bank of India’s (RBI) Financial Stability Report said.

This is evident from the fact that the liquidity coverage ratio (LCR) has come down from a high of 173 per cent as of September 2020 to 135.6 per cent as of September 2022. It, however, still remains comfortably above the minimum regulatory requirement of 100 per cent.
 

Incidentally, the LCR of private banks have fallen