NEW DELHI: The financial conditions index prepared by the CII and the Indian Banks' Association (IBA) for the April-June quarter of the financial year 2020-21 recorded a steep drop below the 50 mark owing to the expectation of deterioration in the overall financial conditions in the economy on account of worsening funding liquidity, external financial linkages and economic activity index.
The financial conditions index, which is formed of four sub-indices, 'cost of funds' Index, 'funding liquidity' index, 'external finance linkages' Index and 'economic activity' Index, was recorded at 44.2, down from a reading of 60.5 in the fourth quarter of FY 2019-20.
"This is primarily due to the outbreak of the COVID-19 pandemic which has sent economies and financial sector across the world into a meltdown. With a series of lockdowns happening across the world bringing economic activities to a virtual halt, organizations in the global arena are uncertain about the whereabouts of their cash flows and business prospects. India is not an exception," said the joint report.
Chandrajit Banerjee, Director General, CII said: "The impact of COVID-19 has been much worse than the financial crisis faced by the world including India in 2008. While the lockdown was necessary to mitigate the impact of coronavirus on the population, it has had dire implications on the financial conditions of the economy."
He noted that in this hour of need, banks along with NBFCs and MFIs have the ability to ensure smooth and continuous flow of credit, particularly to MSMEs, farm sector and retail sector and ensure some economic activity. The measures announced by the government and RBI, have come as a big relief to them and with an expected upliftment of the lockdown soon, the financial conditions can only improve, Banerjee added. (IANS)