By TIOL News Service

NEW DELHI , MAY 22, 2017: THE CII-IBA Financial Conditions Index at 56.9 for the first quarter of Financial Year 2017-18 reflects positive outlook in the overall financial condition in the Indian Economy as compared to the previous quarter (48) owing to the expectation of improvement in the overall financial conditions in the economy on account of growth of External Financial Linkages, Funding Liquidity Index and Economic Activity Index.

Releasing the Index for the first quarter of 2017-18, Mr Chandrajit Banerjee, Director General, CII said that the improvement of the Financial Conditions Index projects overall optimism in the Indian financial sector on the back of increase in consumption, infrastructure spending amplified by slew of landmark reforms as evidenced by rollout of GST and formulation of the stressed loans resolution package through an ordinance by amending the Banking Regulation Act.

According to CII-IBA Financial Conditions Index for the first quarter of Financial Year 2017-18, there was improvement in the expectation of banks and financial institutions which is captured in improvement in the Economic Activity Index (55.6). There is also improvement in Funding Liquidity Index (72.2), and External Financial Linkages Index (59.3). There has been a relative decline in the Cost of Funds Index (40.3) as compared to the previous quarter owing to the expectation of increase in the interest rates leading to deterioration in the expectation of short term interest rate and Marginal Cost of Lending Rate (MCLR).

There were 31 major banks and financial institutions who participated in the survey with a combined total assets of more than Rs.60 Lakh crores.

Commenting on the performance of the Index, Mr Rajeev Rishi, Chairman, IBA and Chairman & Managing Director, Central Bank of India said that the Index reading of 56.9% for the first quarter is a very positive signal. Since the banks have passed on the benefits of lower cost of funds in the last quarter of the previous year, further action in this quarter is not expected. However, funding liquidity index has shown the maximum upward movement indicating the liquidity position would be comfortable and banks are in a position to meet the credit demands of the productive and needy sectors”.