Page 6 - Banking Finance April 2023

BANK UPDATE

total working hours have to be in- After remaining in deficit mode for 17 structure Mission (PM-ABHIM),
creased by 40 minutes per day, accord- days, RBI absorbed Rs 18,256.53 crore launched in October 2021.
ing to the circular issued by the All In- of liquidity on February 28 on a net
It said one of the loans will prioritise
dia Bank Employees' Association. basis. Between February 8 and Febru-
health service delivery in seven states-
ary 27, the average daily infusion by
At the bilateral meeting between the Andhra Pradesh, Kerala, Meghalaya,
the RBI into the system was Rs
Unions and IBA on February 28, it was Odisha, Punjab, Tamil Nadu and Uttar
27,107.82 crore.
agreed upon that to enforce a five-day Pradesh-in addition to the national
work week, "it has emerged that the While the net absorption number level interventions.
total working hours can be increased shows the surplus liquidity which is
One of the loans will support efforts to
by 40 minutes per day with cash trans- being sucked out of the system by RBI,
prepare India's surveillance system to
actions from 10 am to 4 pm and non- net injection reflects the deficit. Liquid-
better detect and report epidemics of
cash transactions upto 4-30 pm." ity in the banking system refers to the
potential international concern and
readily available cash that banks need
With the proposal getting IBA's nod, it ensure rapid response, among others.
to meet short-term business and finan-
will be sent to the finance ministry and The other loan will support govern-
cial needs.
subsequently to the Reserve Bank of ment efforts to bolster service delivery
India (RBI) for approval. "Essentially, it (liquidity surplus) is be- through a redesigned primary
cause of the deposits which have healthcare model.
SBI completes commercial started increasing due to rise in inter-
est rates. At the same time, there is Big domestic deposits
trade in Sri Lankan rupees
some kind of slowdown in credit de-
State Bank of India said it completed cushion Indian banks
mand," Bank of Baroda Chief Econo-
its first non-dollar transaction with Sri The collapse of Silicon Valley Bank
mist Madan Sabnavis said.
Lanka, by paying for exports in Sri (SVB) has spooked banking stocks
Many banks have increased their de- worldwide. With the US Federal Re-
Lankan rupees as India looks to bring
posit rates after the RBI raised the serve (Fed) embarking upon an inter-
countries that are short of U.S. dollars
repo rate by 250 basis point (bps) to est-rate increase spree to tame infla-
into the trade mechanism.
6.50 per cent since May 2022. tion, the Street fears that the SVB cri-
The move comes as Sri Lanka grapples
sis-triggered largely due to asset-liabil-
with its worst economic crisis since its The weighted average domestic term
ity mismatch - is only the beginning.
independence, triggered by a shortage deposit rate (WADTDR) on outstanding
of dollars. rupee term deposits of scheduled com- Amid rout in global banking stocks, the
mercial banks increased by 12 basis Bank Nifty Index - a gauge for the per-
Banking system liquidity points from 5.78 per cent in December formance of leading Indian banks has
2022 to 5.9 per cent in January 2023, dropped over 4 per cent in just two
turns surplus on higher
the latest RBI data showed. trading sessions.
deposit growth, govt
While banking stocks will continue to
spending World Bank commits $1 b remain under pressure as the SVB cri-
sis unravels, analysts believe Indian
The banking system liquidity has be- to India for enhancing
banks' deposit mix provides the requi-
come surplus in the last few days on
public healthcare infra site cushion.
higher deposit accretion and increase
The World Bank will extend two comple-
in the government spending. "Amid all the doom and gloom in glo-
mentary loans of $500 million each to
The Reserve Bank of India (RBI) ab- bal banks and a contagion impact from
India to bolster public healthcare infra-
sorbed on an average Rs 70,933.8 crore the SVB issue, banks in India stand out
structure in the country.
of liquidity from the system on a daily with hardly any exposure - directly or
basis between February 28 and March In a statement, the multilateral body indirectly to SVB. It remains a domes-
7. The net liquidity absorption by RBI said its combined financing of $1 billion tic deposit-funded system, with invest-
stood at Rs 1.14 lakh crore on March 5 will support India's flagship Pradhan ments in Indian government securities
and Rs 1.05 lakh crore on March 4. Mantri-Ayushman Bharat Health Infra- (G-secs).

6 | 2023 | APRIL | BANKING FINANCE