The change in ratio is attributed to the fact that banks have not been successful in deploying funds in credit. In fact, S.S. Tarapore, deputy governor, has exhorted bankers to reduce interest rates in view of the fact that credit has not picked up and borrowers are accessing the market directly. Bank credit during the period June 28-July 26 grew to Rs 2,70,221 crore from Rs 2,68,270 crore. The rise in bank credit, therefore, has been a meagre Rs 1,951 crore. Of the total bank credit, loans, cash credit and overdrafts taken together have jumped to Rs 2,43,191 crore from Rs 2,40,865 crore. However, during the same period, investments grew by Rs 4,120 crore to touch Rs 1,77,684 crore. The result was a rise in the investment deposit ratio to 38.07 from 37.61.
The growth in deposits during the June 28-July 26 period has been to the tune of Rs 5,205 crore. The actual aggregate deposit figure as of July 26, 1996 is Rs 4,66,737 crore. During the period, demand deposits grew to Rs 79,958 crore from Rs 78,149 crore and time deposits increased to Rs 3,86,778 crore from Rs 3,83,386 crore. Cash-in-hand and balances with Reserve Bank fell to Rs 60,815 crore from Rs 63,961 crore during the same period.
The foreign currency assets has fallen marginally to US $17.88 billion on August 16, 1996 from US $ 17.91 billion on August 9, 1996. The level of gold stayed put at $4.4 billion and the SDRs fell to $61 million from $91 million. The total foreign currency reserves were $22.35 billion, down from $22.41 billion.
Reserve money fore the week ended August 2, 1996 has fallen by Rs 2,604 crore to touch Rs 1,85,362 crore. This is a massive decline of Rs 8,974 crore over the March 31, 1996 figure. However, for the fortnight ended August 2, 1996, broad money (M3) has increased by Rs 25,239 crore to touch Rs 6,27,075 crore.
The sustained rise in M3, despite the fall in reserve money over the March 31, 1996 figure has caused concern amongst bankers.
It is pointed out that the divergent movements in M3 and reserve money signals a dangerous trend in the money multiplier. During the fortnight ended August 2, 1996, Reserve bank credit to the government fell by Rs 2,069 crore to touch Rs 1,31,090 crore. Even bank credit to the commercial sector has decreased to Rs 1,246 crore. The decline is ascribed to the bank credit falling by Rs 1,255 crore.
The incremental ad hoc treasury bill level has fallen to Rs 12,575 crore as of August 2, 1996 as against the August 4, 1995 level of Rs 15,445 crore.The total outstanding ad hoc treasury bills was Rs 42,020 crore.
The incremental 'on tap' bills held by banks as of August 2, 1996 over March 31, 1996 levels stood at Rs 4,002 crore. Last year, the corresponding figure was Rs 465 crore.