The figure went up to Rs 3,360 crore, from Rs 2,585 recorded in the previous week. However, even after this increase, they are well below the prescribed limit of Rs 9,000-crore.
Net RBI credit to the government, which had been on the wane for the past two weeks, went up by 2.9 per cent. It rose to Rs 1,26,454 crore on October 4 from Rs 1,22,912 crore on September 27. The decline was primarily the result of falling adhocs in the previous two weeks. Treasury bill holdings by banks and state governments as on October 11 came down to touch Rs 2,546 crore and Rs 8,375 crore respectively. Bank credit, meanwhile, continued to accelerate for the second consecutive fortnight. Non-food credit grew by 1 per cent this fortnight over the previous one. These are signs that the banking sector is witnessing a growth in credit offtake at last. Interestingly, the reversal in the trend of falling bank credit had taken place before the credit policy announcements. The measures in the credit policy resulted in a decline in the lending rates. On September 6, 1996, the State Bank of India cut its prime lending rate by 50 basis points to 15.5 per cent from 16 per cent. Other banks also followed suit.
This rate cut can be attributed the growth in credit during the past one month. Says a banker, it is clear that the demand for credit is interest-elastic. Why else would credit pick up on a cut in the prime lending rates. Advances by commercial banks during the fortnight grew to Rs 2,53,485 crore from Rs 2,50,949 crore. Food credit continued to decline, while loans, cash credit and overdrafts saw a rise of Rs 3,108 crore to Rs 2,28,594 crore.
Aggregate deposits for the fortnight ended October 11 went up marginally by 0.2 per cent over the previous one. This is in contrast to the fortnight ended September 27 when the banking sector saw a massive growth in deposits to the tune of Rs 7,892 crore over the previous fortnight. The marginal rise can be attributed the decline in the demand deposits. These fell by Rs 312 crore to Rs 78,597 crore over the previous fortnight.
Investments by banks in government securities rose by Rs 259 crore to Rs 1,45,560 crore for the fortnight ended October 11. The overall investment by the banking sector also rose by 0.1 per cent during the same period.
The reserve money during the week ended October 4 went up to Rs 1,87,152 crore - a growth of Rs 3,242 crore over the previous week. Bank deposits with the RBI also went up by Rs 4,293 crore to Rs 58,479 crore during the week ended October 4. The increase in reserve money can be attributed to a rise in the net RBI credit to the government. The foreign exchange reserves continued to rise with the foreign currency assets of the RBI growing to $18.83 billion from $18.76 billion during the week ended October 18. SDRs and gold reserves remained unchanged at $18 million and $4.41 billion respectively. The forex reserves grew to $23.26 billion from $23.19 billion.
