Among the sub-indices, the Cost of Funds Index witnessed the maximum improvement to reach at 71.2 in Q1 FY 2016-17 from 44.8 in the previous quarter. This reflects that the majority of the respondent banks and financial institutions expect the overall cost of funds to decline in the June 2016 quarter.

The Funding Liquidity Index was recorded at 67.5, second highest value among the sub-indices, recording significant improvement from the previous quarter (45.7). The number is significantly higher than the 50 mark, signaling a strong expectation of improvement in the funding liquidity in the Indian financial system.

The External Financial Linkages Index is at 54.5 as against 36.0 in the previous quarter. The Indian financial sector remained unperturbed from the effects of the US Fed interest rate as majority of the banks and financial institutions expect net capital inflows by FIIs to increase in the June quarter.

The Economic Activity Index with a standing at 51.6 witnessed deterioration from 64.6 in the previous quarter. The deterioration on a quarter on quarter basis was led by the performance on the inflation (Consumer Price Index) front which was expected by majority of the respondent banks and financial institutions to deteriorate. However, majority of the respondents expected improvement in growth rate of real GDP vis-à-vis the previous quarter.

The CII - IBA Financial Conditions Index is based on a survey of major banks and financial institutions on their expectations of key financial and economic variables determining financial conditions in the Indian economy.

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