Meanwhile, the M3 increased by Rs 938.8 billion fortnightly, led by rise in all three components viz., time deposits, demand deposits with banks and currency with the public.
Components
M3 decelerated 10.9% till 06 March 2015 in 2014-15 compared with the 12.7% rise in the same period a year ago. Moreover, the annual growth rate at 11.3% is lower than the 14.3% increase a year ago, mainly due to the deceleration in time deposits with banks while currency with the public and demand deposits with banks accelerated. The growth rate in time deposits with banks decelerated to 11.1% from 15.3% a year ago, demand deposits with banks, another major component of broad money, increased at 13.2% from 12.5% a year ago and currency with public clocked growth of 10.9% same as a year ago.
Meanwhile, the growth in M3 increased by Rs 938.8 billion, led by rise in all three components viz., time deposits, demand deposits with banks and currency with the public. Demand deposit with banks grew 11% till 06 March 2015 compared with a rise of 4.7% in the same period a year ago. The annual growth rate stood at 13.2% as on 06 March 2015 compared with a rise of 12.5% a year ago. On other hand, time deposits increased 10.8% till 06 March in 2014-15 compared with 14.3% growth in the same period a year ago. The annual growth rate stood at 11.1% on 06 March compared with a 15.3% increase a year ago.
One of the major components of M3, that is currency with the public, grew 10.9% annually on 06 March 2015 compared with 9.9% increase a year ago. It recorded a 10.9% growth till 06 March in 2014-15 compared with a 9.4% increase in the same period a year ago. Meanwhile, fortnightly the currency with the public increased 0.9% to Rs 126.2 billion.
Sources
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The net bank credit to government rose 1.7% in the fortnight ended 06 March 2015 and increased 5% till 06 March in 2014-15. This is lower from the 12.5% growth a year ago. The annual growth rate decelerated to 4.6% on 06 March 2015 compared with 13.1% a year ago. The growth in net foreign exchange assets of the banking sector stood at 13.4% till 06 March 2015 in 2014-15 compared with a growth of 14.2% in the same period a year ago. Meanwhile, the annual growth rate rose 16.8% on 06 March 2015 compared with a rise of 17.7% a year ago.
Reserve money
The reserve money growth rate accelerated annually in March 2015. The annual growth rate was 12.6% on 20 March 2015 compared with the 10.5% growth a year ago. The acceleration in bankers' deposits with RBI and currency in circulation led to acceleration in reserve money growth. While the growth in bankers' deposit with the RBI accelerated to 17.7% on 20 March 2015 compared with a rise of 12.2% rise a year ago, the currency in circulation grew 10.7% from the 10.1% rise a year ago.
Also, the acceleration in the foreign exchange growth helped the growth rate of reserve money. Net foreign exchange assets of the RBI grew 17.6% on 20 March 2015 compared with a rise of 14.9% a year ago. Also, the growth rate was 17% till 20 March in 2014-15 compared with a 15.1% rise in the same period a year ago. Net non-monetary liabilities of the RBI fell 5.5% till 20 March 2015 in FY15 compared with a 25.9% growth in the same period at year ago. The annual growth rate fell by 8.6% on 20 March 2015 compared with a 24.9% rise a year ago.
Outlook
The money supply growth continued on deceleration path following lower time deposits growth. The RBI reduced the repo rate by 25 bps in starting March 2015 after reducing it by 25 bps in mid January, which may help increase M3 going forward. However, the tepid credit growth has been forcing banks to cut pricing of deposits over the past few months. This may further impact the M3 growth. The expansion in reserve money was matched by a seasonal pickup in the currency in circulation and an increase in bankers' deposits on the components side.
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