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C. Shivkumar

THE risk weighted lending rates remained low. The effective weighted average cost of working funds for bankers is in the region of 4.5-5 per cent, whereas corporate bond markets have dropped below six per cent.

The spreads between corporate borrowing rates and sovereign yields have begun to widen. These spreads are now in the region of about 75-100 basis points over sovereign yields, depending on whether the `AAA' corporate is public or private sector. Consequently, bankers have now begun moving higher up the risk lending chain in a bid to push up spreads. Spreads for investment grade lending is in the region of about 500 basis points over the weighted average cost of working funds. Some of these deployments were increasingly pushed into being in the retail segment. However, large volumes of such lending were coming from the small and medium enterprises segments, where sizeable volumes of the credit deployment were now being concentrated. Consequently, the incremental non-food credit deposit ratio for most banks was now in the region over 60 per cent. The nominal CD ratio was in the region of about 55 per cent. But this rise was also because some of the incremental credit demand was being met through low cost options like selling securities.

As a result, for most of the banks, the investment deposit ratios have begun dropping as well. Investment deposit ratios are now about 43 per cent. These figures are in the region of about 45 per cent about a month ago.

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