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ICICI Securities: Current Account Discipline - Not An Easy Nut To Crack For Banks

ICICI Securities: Current Account Discipline - Not An Easy Nut To Crack For Banks

A customer writes on a cheque deposit slip at a bank branch in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)
A customer writes on a cheque deposit slip at a bank branch in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

ICICI Securities Report

Even after a week of the Reserve Bank of India’s notification on current account (CA) discipline, our interactions with bankers suggest that quantifying the (positive/adverse) effect is a humungous task at this juncture as it calls for assessment on a case-to-case basis across business segments.

However, broader implications are clear:

1. the objective is to monitor the cash flows and end-use of funds to avoid diversion / frauds;

2.both CA (Rs 12 trillion) and cash credit/over draft (Rs 20 trillion) balance in absolute term may shrink (at least to the extent of an overlap - estimated at single digit proportion of CA);

3. ability to earn out of CAs will taper off;

4. realignment of CA ownership with lending facility is not so straight forward; some consolidation, some shakeout in relationship as disproportionate CA or overboard credit facility may not co-exist.

Click on the attachment to read the full report:

ICICI Securities Banking_Current account discipline Aug20.pdf

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