Indian PSBs well positioned to offer credit in the range of USD 60 to 100 bn
2 min read . Updated: 27 Feb 2023, 11:07 PM IST
Premium- A smallcase manager named Lotusdew Wealth claims that the public sector banks have the liquidity to offer credit worth USD 100 billion.
A smallcase manager named Lotusdew Wealth claims that the public sector banks have the liquidity to offer credit worth USD 100 billion. During the fiscal year that ended in March 2022, or FY22, public sector banks reported USD 70 billion (Rs. 6.22 lakh crore) in cash and balances with the RBI, up from USD 60 billion (Rs. 5.4 lakh crore) in FY21.
Cash and balances held by private banks with the RBI were USD 45 billion (Rs. 3.93 lakh crore) in FY22 as opposed to USD 35 billion (Rs. 2.9 lakh crore) (YoY) in FY21. According to this, PSU banks have roughly 60% more cash and balances with the RBI than private banks do. For PSU Banks, there are USD 80 billion (6.42 lakh crore) in bank balances and USD 75 billion (5.91 lakh crore) YoY in money on call with the RBI. For private banks, there are USD 40 billion ( ₹3.34 lakh crore) in bank accounts compared to USD 35 billion ( ₹2.75 lakh crore) YoY in money on call with the RBI. This shows that PSU Banks have bank balances and money at call with the RBI that are over 90% larger than Private Banks, as per Lotusdew Wealth.
When a 2.5x multiplier is applied to a liquidity ratio of 4.5%, there is a liquidity cushioning of USD 45 billion, enabling the public sector banks to provide an upper base of USD 100 billion credit offtake. But, the RBI's recent adjustments, such as revising its position that inflation is sticky and hence likely to be less accommodating, may minimise credit demand. Yet, a lower base range loan in the market will still be accessible for about USD 60 billion, the report of Lotusdew Wealth says.
Banking stocks to watch out for are Credit Access Grameen, IndusInd Bank and Ujjivan Small Finance Bank. Abhishek Banerjee, smallcase manager & Founder, Lotusdew said “Our smallcases like Listed Venture Capital, Nanocap Champs, and Golden Opportunities take advantage of financial conditions prevailing in the market by going for capital market-related companies like brokers who enjoy income from the free float in rising interest rate environment."
Listed Venture Capital smallcase had a three-year total return of +315% and exceeded Smallcap index by 15%. In the last year, the relatively new strategy Nanocap Winners has beaten the small-cap index by +42%, while Golden Opportunity has produced a return of +7% since October 2022. Costs and fees are not included in any of the performance figures, according to a research report published by Lotusdew Wealth.
According to the most recent statistics provided by the Reserve Bank of India (RBI), the banking system's credit climbed 16.1% year on year (YoY) to ₹134.17 trillion in the fortnight that ended on February 10. Credit growth was at 16.5 percent YoY about a month ago on January 13 fortnight.