Axis Bank's managing director Amitabh Chaudhry warned that the record inflow of foreign-currency deposits could lead to abnormal lending practices, raising concerns about the stability of the banking sector.
India — direction and magnitude withheld
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Key takeaway
Record FCNR deposit inflows are flooding Indian banks, raising deployment pressure.
- Step 1 · The triggerrecord FCNR deposit inflows flood Indian banks with excess liquidity, lowering funding costs and increasing pressure to deploy funds
- Step 2 · Knock-onbanks may relax lending standards to deploy surplus funds, increasing risk of abnormal lending and future asset-quality deterioration
- Step 3 · Reaches youfuture rise in non-performing assets could trigger regulatory tightening and restrict SME access to credit, raising borrowing costs and risk
The trigger is reported by the source below. The steps that follow are Branch²’s traced reasoning — how the shock could reach a business like yours, not a prediction.
Source: Livemint Companies
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