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Banks with faster loan growth face funding pressure as RBI tightens liquidity

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Banks with faster loan growth face funding pressure as RBI tightens liquidity

Banks with faster loan growth face funding pressure as RBI tightens liquidity

The pressure follows the Reserve Bank of India’s decision to raise the repo rate to 5.50 per cent and tighten banks’ daily cash reserve maintenance requirements.

Bank of Baroda and Axis Bank face potential funding pressure as loan growth outpaces deposit growth. HDFC Bank and Bank of India have stronger deposit growth relative to loan growth. Tighter liquidity could push up banks’ short term funding costs. NBFCs reliant on bank borrowing may face higher costs and margin pressure.

Inflation has stayed above the Reserve Bank of India’s (RBI) target of 4% for the past three months (Photo: Reuters).

Banks whose loan growth is outpacing deposit mobilisation could face higher funding costs as banking system liquidity tightens, while non banking financial companies (NBFCs) dependent on bank borrowing and wholesale funding may face pressure on margins. The pressure follows the Reserve Bank of India’s decision to raise the repo rate to 5.50 per cent and tighten banks’ daily cash reserve maintenance requirements. From the fortnight beginning October 16, banks must maintain at least 99 per cent of their prescribed cash reserve ratio (CRR) on a daily basis, compared with 90 per cent earlier. The RBI has also scheduled a Rs 25,000 crore sale of government securities on October 13 to absorb liquidity. Advt

Bank of Baroda and Axis Bank have reported faster loan growth than deposit growth in Q2FY27, while HDFC Bank’s faster deposit mobilisation provides a relatively stronger buffer on this measure.


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