Money Supply growth Picks up on the back of faster pace of deposit mobilisation

The rise in demand and time deposits with banks helped the growth rate in Money Supply (M3) to cross the Reserve Bank of India's (RBI) projection of 13%. Backed by a large flow of FCNR(B) deposits and advance tax mobilisation, aggregate deposit growth picked up. The growth in aggregate deposits net of FCNR(B) deposits, however, has averaged around 14%, in line with the Reserve Bank's indicative trajectory, since October 2013. In line with this, money supply growth increased to 14.5% in mid-January 2014 from 12.9% at the end of Q2 of 2013-14. On the source side, the credit off-take although moderating, supported money growth. The growth in money supply excluding the FCNR(B) effect, however, was lower at 12.4% (mid-January 2014).

The reserve money growth rate accelerated in FY 2014 till date. It registered a 7.2% in the financial year ending 24 January 2014 compared with a 4.4% rise in the same period last year. As on 24 January 2014, the annual growth rate stood at 9% compared with 4.2% growth last year. The acceleration in growth in banker's deposit with RBI, led to acceleration in reserve money growth. While the growth in currency in circulation decelerated to 10.4% as on 24 January 2014 compared with the 11.7% rise last year, the bankers' deposits with the RBI showed a growth of 4.1% from 15.4% fall recorded last year.

 

Also, the growth in foreign exchange has helped the rise in growth rate of reserve money. Net foreign exchange assets of the RBI recorded a 14% growth as on 24 January 2014 compared with a rise of 8.9% last year.

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