deposit base, banks are able to lend more,and at lower interest rates. It comes as no surprise then that banks have cut lending rates following demonetisation because they are flush with deposits. The following table shows the fall in the marginal cost of funds based lending rates between October 2016 to March 2017. Over and above the fall in interest rates, a direct consequence of the squeeze on cash is the increasing attraction for financial savings as compared to holding cash, or investing in gold and real estate. In recent months, India has seen record inflows into all kinds of financial assets such as stocks and mutual funds (in addition to bank deposits). India’s mutual funds are flush with money with the outcome that our stock markets have held up well during August and September 2017,even when foreign portfolio investors pulled out large chunks of money.
14
Oct-Nov-2017