RBI projects fall in reserve money growth

Going by the figures released by the Reserve Bank of India (RBI) in its Weekly Statistical Supplement (WSS), the reserve money growth registered by RBI is slated to go down further in the coming weeks, bankers said.

While the reserve money on February 6 slipped to Rs 3,98,436 crore as against Rs 3,98,650 crore on January 30, 2004, the fall in reserve money growth is dramatic in terms of percentage.

While the year-on-year growth on January 23 was 16.3 per cent, there was a 14.3 per cent decline on January 30 and a further 12.7 per cent fall on February 6.

Bankers said that the growth in reserve money is expected to fall as net foreign assets with the RBI is likely to take a dip this week due to the proposed prepayment of $ 1.3 million high cost debt to Asian Development Bank is likely to take place early this week.

Bankers said that the crucial factor that has led to the decline in reserve money has been the dip in banks' deposit with RBI. They added that banks prefer to park their idle cash at the daily repo window as the CRR was paying nominal returns.

Banks earn 4.5 per cent interest at the RBI's daily repo auction, while in the inter bank repo market, banks earn an interest of approximately 3.60 to 3.80 per cent. The bankers deposit as on February 6, slumped to Rs 73,263 crore compared with Rs 78,060 crore in the previous week.

For the period under review (January 30 to February 6), banks were also seen investing in G-secs in anticipation of a dip in the inflation rate.

According WSS data, investment in government securities on January 30, increased to Rs 6,39,373 crore from Rs 6,53,938 crore as on January 23, 2004 and Rs 6,30,808 crore on January 9.

The pick up in the non- food credit has also contributed to a slip in the reserve money said bankers.

The non-food credit rose to Rs 7,65,388 crore compared with Rs 7,58,664 crore in the previous week.