Tightening the Corporate Tap

By BankBazaar | April 3, 2011

Short – term loans to corporate houses are being held back by the State Bank of India and other prominent banks in the country to tide over the liquidity crunch. This means that if a corporate has a drawing power of Rs. 150 Crores and the bank’s loan outstanding to the company is Rs. 100 Crores, the balance amount of Rs. 50 Crores will not be disbursed immediately.

Earlier, corporates could avail an amount up to their full drawing power. But now, they may have to hold on to their financial need until the liquidity situation eases off itself.

The RBI has instructed banks to hold off distribution of any new personal loan or any loans, as a result of which banks have cancelled their festive loan schemes. The RBI has also notified banks that they should only lend the money that they can raise as deposits, as market borrowing by banks is typically short-term and can land the banks in a destructive liquidity squeeze.

Banks however claim that the rise in the number of loans being distributed is solely because of an increase in the demand for loans from corporates and other enterprises. Banks have also offered large loan amounts to companies facing a resource crunch, due to the rising cost of the dollar.

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.
Category: Articles

About BankBazaar

BankBazaar is the world's first neutral online marketplace for instant customised rate quotes on Loans, Credit Cards, Insurance and Investment products. Shop for financial products just like you buy everything else now - online.

Leave a Reply

Your email address will not be published.