Optimism on recovery in Jul-Sept rises: CII-IBA

The CII-IBA Financial Conditions Index for Jul-Sep registered an optimistic value of 65.2 owing to expectation of improvement in the overall financial conditions in the economy on account of all factors, namely, External Financial Linkages, Funding Liquidity Index, Economic Activity Index and Cost of Funds Index, the Indian Banks' Association said in a release.

This figure is based on round 20 of the Financial Conditions Expectation Survey undertaken in July by the industry body in collaboration with the Confederation of Indian Industries. The 29 respondents to the survey included seven public sector banks, nine private banks, five foreign banks, one co-operative bank, six non-banking finance companies, and one rating agency.

The survey results indicate that there was significant improvement in all the factors vis-a-vis the previous quarter barring the Cost of Funds Index. The overall optimistic expectation is primarily due to the various announcements made to support the economy by the government and the Reserve Bank of India, the release said.

While the value of the Cost of Funds Index declined on quarter, it was the highest contributor with a value of 80.6. Within the Cost of Funds Index, the marginal cost of funds based lending rate recorded the highest value of 95, followed by the short-term interest rate which registered a value of 86.

The corporate bond spread between top rated 10-year corporate and government bonds, and longterm interest rate retrieved the lowest value of 71. With the Indian economy already showing signs of revival after the strict lockdown was relaxed, the expected resumption of activities in 'Unlock 3.0' will further give a boost to the economy, said CII Director General Chandrajit Banerjee.

Several indicators like GST collection, petrol consumption, electronic toll collection have shown early signs of recovery. Although these signs are quite early, there is a lot of positive expectation.