Banks dip into surplus funds, short-term borrowings to support credit growth
Sabnavis cautioned that even the surplus SLR balances should be looked at “a little carefully”. “Normally, the SLR ratio for banks should be 24-25% so that it also covers LCR requirements. But right now only the top banks, and not all, have excess SLR. There are a number of banks, which have a liquidity deficit, and if you don’t have excess SLR, which you can sell in the market, and your deposits are not there, then automatically your business will get squeezed,” he said, adding that in such a scenario, banks will either have to slow down lending or lend against a much higher cost of funds.
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