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August 26, 2011

Liquidity and cash management in a failing economy. How banks and corporates can build a symbiotic relationship

Posted by Vishwanath Thanalapatti (View Profile | View All Posts) at 4:55 AM

Each morning as I read my financial newspaper I see the world economy sinking deeper into a black hole. The learned economists say it's the proverbial second dip. The US economy is not likely to grow till 2013; the policy rates will be kept "exceptionally low". Europe is staggering to stay steady. Germany reported growth of 0.1% from April to June. The 17 member euro zone grew by 0.2% in the same period. Inflation is rising in Asia. So where will the corporates get money from? The banks of course, silly!  Do the banks have money? Yes. They do. The stress tests are teaching the banks fundamental lessons that liquidity is more valuable in difficult times than potential numbers from investments or for that matter risk based lending. The banks will not loosen the purse strings, they are very circumspect. The corporates will have to fend for themselves for liquidity and to be in business with little reliance on banks. This blog looks at the key focus areas where corporates on their own or in conjunction with banks can survive the eco tsunami.  

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