Banks are facing shortage of cash to distribute loans! Know why this crisis arose

Banks Liquidity Crisis: The crisis of cash shortage in domestic banks has deepened. In such a situation, banks may lack cash to distribute loans. Banks’ hands are tied in giving all the loans be it home loan or car loan or education loan or agricultural loan or corporate loan. Banks are facing cash crunch due to advance tax payment by companies and banking sector regulator Reserve Bank of India selling dollars to arrest the fall in rupee.

Biggest cash crisis in 6 months!

According to Bloomberg Economics Index, the country’s banking system has seen the biggest cash shortage in six months. On the basis of what the banks have borrowed from RBI, it is being estimated that till Monday there is a cash shortage of Rs 1.5 lakh crore in the banks. The Reserve Bank of India is continuously selling dollars since October 2024, due to which the cash crisis is increasing.

Crisis increased due to weakness in rupee and trade deficit

The cash crunch in banks is in danger of increasing. The rupee fell to a record level of Rs 84.93 against one dollar on Tuesday, December 17, 2024. Rupee is preparing to fall below 85. Besides, increasing trade deficit and strong dollar have also increased the problem. In such a situation, RBI can sell more dollars to hold the rupee, which may lead to shortage of cash in the banking system. However, on December 6, RBI had reduced the Cash Reserve Ratio (CRR) by 50 basis points from 4.50 percent to 4 percent so that cash could be increased in the banking system. Banks will be able to distribute maximum loans to accelerate growth. This decision of RBI will help in increasing the cash of Rs 1.16 lakh crore in the banking system, but this decision of RBI now seems to be proving inadequate.

Rs 1.4 lakh crore went in advance tax

December 15, 2024 was the last date for depositing advance tax for the third quarter of the current financial year. Due to advance tax deposited by companies, Rs 1.4 lakh crore has gone out of the banking system, which is a major reason for the cash crisis. In such a situation, banks’ hands may be tied in giving loans.

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