Crisil’s Financial Conditions Index (FCI) showed domestic financial conditions were slightly looser in July than the previous month. The index value was 1.0 in July, compared with 0.9 in June. A higher index value indicates easier financial conditions, and vice versa.
“A stable environment across market segments is improving financial conditions. The Reserve Bank of India (RBI) pause in interest rate action has limited the rise in interest rates in the money and debt markets. Also, equity markets outperformed on the back of a strong foreign equity portfolio (FPI) Strong and less volatile. These inflows have also kept the rupee stable,” Crisier said in a report shared exclusively. career line.
softening rate
Short-term interest rates weakened: major money market interest rates slowed down in July, interbank offered rate fell by 5 basis points month-on-month, 91-day treasury bill yield fell by 3 basis points, and 6-month commercial paper (CP) rose by 8 basis points month-on-month . Increased excess liquidity has fueled policy easing. The increase in bank liquidity in July was reflected by the RBI’s absorption of more funds under the Liquidity Adjustment Facility, which accounted for 0.8% of net demand and time liabilities (NDTL) in July, compared to 0.6% in June. Continued return of Rs 2,000 notes, rising bank deposit growth and FPI inflows added to liquidity.
FPI inflows were strong at $5.8 billion (net) in July. Although down from $6.8 billion in the previous month, it was up from $200 million in July last year. While inflows into debt markets slowed ($500m vs $1.1bn), inflows into equity markets remained steady ($5.7bn each in June and July).
Bank credit growth slowed to 14.7% in July from 16% in the previous month, but was still stronger than the 13.4% growth in July 2022. The Reserve Bank of India (RBI) launched I-CRR to align excess liquidity with its monetary stance.
