The shift of the Indian household sector from deposits to inflation hedges such as property and gold is creating a liquidity crunch in the banking sector that’s unlikely to be solved in the near future,” Kristine Li, senior director of Asia-Pacific credit strategy at Royal Bank of Scotland Group Plc, said in an interview in “If banks’ loan growth decelerates, asset quality concerns are likely to return.”
Indian banks’ dollar bonds are heading for their worst January since before the credit crisis as the fastest inflation in spurs customers to buy gold and property, while deposits fail to keep pace with loans.
The notes returned 0.36 percent this month, their weakest start to a year since they delivered 0.29 percent in January 2007, according to HSBC Holdings Plc’s Indian Dollar Bond Index, which is 71 percent bank debt. HSBC data show a 0.71 percent return for lenders in where inflation at 3.5 percent is less than half India
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