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Banks trim their gilt edge to serve red-hot credit demand
Mint Mumbai
|January 30, 2024
Lenders facing liquidity squeeze dip into sovereign securities to address credit appetite
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Banks in India are liquidating some of their investments in sovereign securities to fund an insatiable demand for loans, as deposits become harder to come by amid intense competition.
B Banks have reduced the share of their statutory liquidity ratio (SLR) holdings over the past couple of months, as per Mint calculations based on data from the Reserve Bank of India.
SLR is the proportion of deposits that banks have to mandatorily invest in approved securities.
While RBI mandates banks to maintain SLR investments-in government securities and other sovereign papersof at least 18% of their net demand and time liabilities (NDTL), banks usually maintain 28-29% when credit demand is low.
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