A survey of 26 banks and non-banking financial companies (NBFCs), conducted by Confederation of Indian Industry (CII) and Indian Banks' Association (IBA), has found that these organisations have an optimistic outlook in the fourth quarter of the ongoing financial year. Out of the 26 participants, 10 were public sector banks, six were private sector banks, two were foreign banks and one was a cooperative bank, and seven leading NBFCs represented the non-banking financial sector. The survey is called the CII – IBA Financial Conditions Index.
The score of the index for Q4 of fiscal 2019-21 was 60.5. It looked at four sub-indices, viz, Cost of Funds Index, External Financial Linkages, Funding Liquidity Index and Economic Activity Index.
The Funding Liquidity Index contributed the most towards the score with a value of 74. Depicting the expected liquidity position in the market, the index value is a slight improvement as compared to Q3 of the current fiscal
Meanwhile, the Cost of Funds Index fell significantly to a 52.4, but the report says the value still reflects optimism.
Another index to witness a fall in the value is the External Financial Linkages Index. It recorded a value of 59.6, marginally lower than the previous quarter. According to the report, this value also indicates optimism, largely due to an expected increase in foreign exchange reserve, and mobilization of funds.
The value of the Economic Activity Index stood at 55.8, a slight improvement, indicating moderate optimism, the report stated. The participants expect growth in GDP, non-food bank credit and asset prices.
Releasing the index report, CII Director General Chandrajit Banerjee said that the index value depicted the optimism which is prevalent in the economy despite the global economic scenario. He further said that Union Budget 2020-21 tried to address the issues of all the sectors.
Meanwhile, Chief Executive of IBA said that with Budget 2020 attempting to boost consumption of households and spending on infrastructure, the market sentiments are expected to improve. Moreover, he added that the performance if the Funding Liquidity Index reflects the participants' expectation that the system would have adequate liquidity, which would be ideal for the banks to operate.
The report comes at a time when the market and global leaders have been bearish on the performance of the Indian economy for the past few months.