In keeping with the trend, the central government continues to use ways and means advances (WMA) from the Reserve Bank of India (RBI) as a means of funding instead of as a temporary facility.
The recourse of the government to ways and means advances from the apex bank increased by Rs 1,469 crore during the week ended June 12 to stand at Rs 10,986 crore.
This is well above the 75 per cent trigger limit of Rs 8,250 crore for fresh flotation of securities.
This year, the central bank's support to the government borrowing programme has been Rs 13,999.50 crore. By June 12, the net RBI credit to the government had increased by 12.3 per cent over the March 1998 levels to Rs 16,688 crore.
The year-on-year growth in reserve money stood at 8.6 per cent on June 12. Correspondingly, the year-on-year growth in money supply (M3) was 17.3 per cent on June 5, well above RBIs intended trajectory of 15-15.5 per cent for this fiscal.
Analysts feel that RBI would be revising the money supply target upwards when it announces the credit policy for the second half of the year.
There has been a reduction in the reliance of the government on treasury bills in this financial year. While the stock of treasury bills with RBI has increased by Rs 33 crore, the stock of treasury bills with banks, state government and other entities declining by Rs 3,131 crore, Rs 2,115 crore and Rs 1,545 crore, respectively.
Since the implicit cut-off yields at the treasury bills auction is out of sync with the secondary market yields, banks have shied away and RBI has also been raising only token amount of Rs 100 crore at all the auctions.
Resource flow from the banks to productive sectors has declined by Rs 4,621 crore in this fiscal, while investment in government and other approved securities has increased by Rs 17,596 crore.
On the resources side, the aggregate deposits of the banking sector has increased by Rs 12,217 crore by June 5.
The foreign currency assets (FCA) of the apex bank have declined by $15 million to $24,339 million during the week ended June 19, 1998.
The value of gold held by RBI was unchanged at $3,098 million, while the stock of special drawing rights held by it increased by $2 million to $120 million. The forex reserves stood at $27,757 million on June 19.
Thus the FCA of RBI have declined by $1.365 billion since June 1. In the present financial year the FCA of RBI have declined by $1,636 million.
