Money Supply-Lower deposits keep M3 growth low

The money supply (M3) registered growth of 11.3% as on 15 May 2015. This was slightly higher than growth registered in the month of April 2015. However, on annual basis the M3 growth eased from 13.5% in May 2014, amid deceleration in both demand and time deposits with banks. Meanwhile, the M3 declined by Rs 434.1 billion fortnightly, led by fall in both demand and time deposits with banks and other deposits with RBI while currency with the public recorded rise.

Components

M3 accelerated 2.2% till 15 May 2015 in 2015-16 compared with the 2% rise in the same period a year ago. Meanwhile, the annual growth rate at 11.3% is lower than the 13.5% increase a year ago, mainly due to the deceleration in time deposits with banks and demand deposits with banks while currency with the public accelerated. The growth rate in time deposits with banks decelerated to 11.7% from 14.0% a year ago, demand deposits with banks, another major component of broad money, also eased at 8.3% from 14.2% a year ago and currency with public clocked growth of 10.6% from 10.5% a year ago. Meanwhile, the growth in M3 decreased by Rs 434.1 billion in fortnight ended 15 May, led by fall in both demand and time deposits with banks while currency with the public recorded rise.

 

Demand deposit with banks fell 1.7% till 15 May 2015 compared with a rise of 0.2% in the same period a year ago. The annual growth rate stood at 8.3% as on 15 May 2015 compared with a rise of 14.2% a year ago. On other hand, time deposits increased 2.1% till 15 May in 2015-16 higher from 1.5% growth in the same period a year ago. The annual growth rate stood at 11.7% on 15 May compared with a 14.0% increase a year ago.

One of the major components of M3, that is currency with the public, grew 10.6% annually as on 15 May 2015 compared with 10.5% increase a year ago. It recorded a 5.4% growth till 15 May in 2015-16 compared with a 6.1% increase in the same period a year ago. Meanwhile, fortnightly the currency with the public increased 2.1% or by Rs 306 billion.

Sources

The net bank credit to government rose 0.7% in the fortnight ended 15 May 2015 and increased 5.3% till 15 May in 2015-16. This is higher than the 1.1% growth a year ago. The annual growth rate decelerated to 3.2% as on 15 May 2015 compared with 8.7% a year ago. The growth in net foreign exchange assets of the banking sector stood at 5% till 15 May 2015 in 2015-16 compared with a growth of 1.6% in the same period a year ago. Meanwhile, the annual growth rate rose 18.4% on 15 May 2015 compared with a rise of 18.5% a year ago.

Reserve money

The reserve money growth rate accelerated annually again in May 2015. The annual growth rate was 11.4% on 22 May 2015 compared with the 11% growth a year ago. The acceleration in bankers' deposits with RBI, currency in circulation and other deposits with RBI led to acceleration in reserve money growth. While the growth in bankers' deposit with the RBI accelerated to 11.8% on 22 May 2015 compared with a rise of 11.4% rise a year ago, the currency in circulation grew 10.8% same as rise a year ago. The other deposits with RBI also increased annually.

Meanwhile, the net foreign exchange assets of the RBI grew accelerated to 23% on 22 May 2015 compared with a rise of 13.7% a year ago. Also, the growth rate was 4.5% till 22 May in 2015-16 compared with a 0.3% rise in the same period a year ago. Net non-monetary liabilities of the RBI increased 8.1% till 22 May 2015 in FY16 compared with a fall of 4.2% in the same period at year ago. The annual growth rate decelerated by 6.3% on 22 May 2015 compared with a 12.6% rise a year ago.

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