Net foreign exchange assets of the Reserve Bank of India (RBI) went up by Rs 2,156 crore to Rs 88,466 crore during the week ended March 14. This led to a 1.2 per cent increase in the reserve money. The Reserve money increased from Rs 1,91,378 crore to Rs 1,93,681 crore, a rise of Rs 2,303 crore.
While reserve money has grown by 1.2 per cent, the increase in money supply (M3) has been to the extent of only 0.6 per cent. The rise in money supply was smothered by a Rs 4,116 crore fall in net bank credit to the government, a decrease of 1.4 per cent. While net RBI credit to the government fell by Rs 10,025 crore the net bank credit to the government rose by Rs 5,909 crore. As per the figures available on March 29, for the financial year 1996-97, the increase in M3 has been only 12.7 per cent.
This is higher than the 10.1 per cent rise that was witnessed during fiscal 1995-96.
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The increase in net foreign exchange assets of the central banks is principally on account of the sustained foreign exchange inflows. Forex inflows have been on the rise since the presentation of the budget. Total forex reserves went up from $24,659 million on March 21 to $25,139 million on March 21, an increase of $480 million.
Aggregate deposits of the banking system stood at Rs 4,89,254 crore as on March 14. This represents an increase of Rs 394 crore over the earlier fortnight.
There has been a marginal increase in the credit deposit (CD) ratio of the banking system. The CD ratio went up from 54.81 per cent to 55.05 per cent. This on account of a marginal increase in the non-food credit from Rs 2,59,715 crore to Rs 2,43,276 crore. Food credit, however, went down by Rs 277 crore to Rs 7,936 crore for the fortnight ending March 14.
An annual point to point comparison shows that the CD ratio has fallen from 59.38 per cent to 55.05 per cent. The investment deposit ratio has gone up from 38.94 per cent to 39.02 per cent. Comparison on an annual point to point basis shows that the increase in bank credit has been only six per cent against 17.2 per cent in the corresponding period in 1995-96.
With banks unable to find deployment avenues it is expected that the investment deposit ratio at the end of the year would be higher.
During the period March 7 to March 14, the stock of rupee securities held by the RBI went up by Rs 714 crore to Rs 1,15,540 crore. It is only since the second fortnight of last month that the bullish trends in the securities market have taken root.
In fact banks are buying securities from the RBI window. Bankers point out that the reduction in the holding of securities by the RBI should be evident when the year-end figures are available.