Key Points
The report notes that banks have drawdown Rs 5 lakh crore from the reverse repo window in FY23, which has enabled them to address a surge in the gap between incremental credit and deposits, but this will not be available in FY24..
The transmission of monetary policy in the banking system could intensify in the new fiscal year, driven by the sharp rise in banks marginal cost of funding..
Domestic rating company India Ratings and Research (Ind-Ra) expects bank marginal cost of funds-based lending rate (MCLR) to increase by 100-150 basis points in FY24...
While the drawdown from the reverse repo in FY23 to the tune of `5 lakh crore has enabled banks to address a surge in the gap between incremental credit and deposit, this will not be available in FY24, the rating agency said..
Given the large part of the incremental credit disbursement has been supported by the drawdown of cash flow with the RBI in lieu of reverse repo in FY23, the impact of the marginal cost of funding has so far been limited, the agency said in a report..
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