'Damage to global liquidity is $18 trillion'?
Hemant Mishr, Head (Global Markets, India), Standard Chartered Bank, spoke to BT’s Puja Mehra on the liquidity crunch and the high lending rates.
Despite all-round efforts, loans still aren’t easily available. Why?
Losses of banks around the world add up to $1.2 trillion. Typically, banks leverage their funds by 10-20 times. Even at 15 times, the damage to the global liquidity markets is about $18 trillion. The worst-hit in India is trade finance every dollar of the $380 billion imports and exports needs some sort of financing because there is no dollar liquidity tap offshore. The RBI has provided rupee liquidity but dollar liquidity remains tight in India.
Hasn’t the RBI done enough then?
The RBI has provided an $8-billion window to the public sector banks for their overseas branches, but percentage-wise that is small.
Why aren’t lending rates falling?
The supply of government securities is so high that lending rates can’t fall. At the same time, lenders and investors are very risk averse. Corporate bond spreads have risen. There is an appetite only for triple A assets.
Losses of banks around the world add up to $1.2 trillion. Typically, banks leverage their funds by 10-20 times. Even at 15 times, the damage to the global liquidity markets is about $18 trillion. The worst-hit in India is trade finance every dollar of the $380 billion imports and exports needs some sort of financing because there is no dollar liquidity tap offshore. The RBI has provided rupee liquidity but dollar liquidity remains tight in India.
Hasn’t the RBI done enough then?
The RBI has provided an $8-billion window to the public sector banks for their overseas branches, but percentage-wise that is small.
Why aren’t lending rates falling?
The supply of government securities is so high that lending rates can’t fall. At the same time, lenders and investors are very risk averse. Corporate bond spreads have risen. There is an appetite only for triple A assets.
