Economy

CII-IBA financial conditions index for Q1FY22 drops to 59.1

Our Bureau Mumbai | Updated on June 16, 2021

Despite this, expectations remain positive due to availability of vaccine

The CII-IBA Financial Conditions Index (FCI) for Q1 (April-June) FY2022 has dropped to 59.1 against 72.5 in the preceding (January-March/Q4 FY2021) quarter, owing to expectation of deterioration in all four components of FCI.

While the overall reading of the index has deteriorated in comparison to the previous quarter, it still depicts overall optimism on financial conditions, CII-IBA said in a joint report.

FCI, comprising four sub-indices: Cost of Funds Index (CFI), Funding Liquidity Index (FLI), External Financial Linkages Index (EFLI) and Economic Activity Index (EAI), reading above 50 indicates that the financial conditions are largely optimistic.

On a quarter-on-quarter basis, there has been a decline in the reading from the previous quarter in EFLI (to 58.8 vs 79.3 in the preceding quarter), EAI (67.9 vs 84.4) and FLI (66.7 vs 82.4), with a very marginal decline in CFI (42.9 vs 43.8).

Covid effect

The report observed that the overall fall in FCI can be attributed to the second wave spread of the pandemic. “When compared to Q1FY2021, FCI had registered a figure of 44.2. The index of Q1FY2021-22, shows overall optimism, which can be attributed to the various support measures announced by the government over the last one year,” CII-IBA said.

The report assessed that the decline in FCI is primarily due to continuous struggle to cope with the spread of the second wave of the novel coronavirus.

However, there is still optimism in the expectation of banks and NBFCs (non-banking finance companies) due to the availability of vaccine during this time as against the first wave.

GDP growth, inflation

As per the CII-IBA survey of 30 entities, majority of the respondents (93.3 per cent) expect GDP growth to increase in the current quarter with only 6.7 per cent expecting otherwise.

When it comes to inflation, 73.3 per cent of the respondents expect it to increase, while 20 per cent expect it to decrease.The remaining 6.7 per cent of the respondents expect no change in the inflation.

“The overall credit growth continues to moderate due to risk aversion and continued parking of excess liquidity with the RBI,” the survey said.

Published on June 16, 2021

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