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IV. Monetary Conditions

The accommodative monetary policy stance of the Reserve Bank has continued during 2009-10 so far to support the emerging recovery. While broad money growth witnessed some moderation in recent period, availability of surplus liquidity in the system was evident in the large daily absorption through reverse repo by the Reserve Bank. With the persistence of deceleration in bank credit to the commercial sector, high deposit growth and the Reserve Bank’s liquidity augmenting measures created space for market absorption of the large government borrowing programme. Flow of resources from non-bank sources to the commercial sector during 2009-10 so far has been marginally higher than the corresponding period of the previous year.

IV.1 Monetary and liquidity conditions during 2009-10 so far have been conditioned by the continuation of accommodative monetary policy stance of the Reserve Bank to support a faster economic recovery. Broad money growth (year-on-year) witnessed some moderation during the second quarter of 2009-10 but still remained above the Reserve Bank’s projected trajectory of 18.0 per cent for 2009-10. On the sources side of monetary expansion, banking system’s credit to the Government continued to be the major driver as bank credit to the commercial sector continued to exhibit deceleration. On the component side of monetary expansion, the key driver was the high growth in aggregate deposits. The movements in reserve money reflected the changes in net Reserve Bank credit to the Centre and net foreign assets with the Reserve Bank. Expansion of net Reserve Bank credit to the Centre through purchases under open market operations and unwinding of MSS was moderated significantly due to large daily absorption of liquidity through reverse repo window under LAF. Net foreign assets (net of valuations) with the Reserve Bank recorded an increase in the second quarter of 2009-10, after witnessing decline in the previous quarter.

IV.2 The thrust of the various policy initiatives taken by the Reserve Bank since mid-September 2008 has been on providing ample rupee for the smooth functioning of the financial market, ensuring comfortable dollar liquidity and maintaining a market environment conducive for the continued flow of credit to productive sectors to revive the economic growth in the midst of severe global recession. The important measures which reflect the accommodative monetary policy stance include reduction of the repo and reverse repo rates, reduction of the CRR and the SLR, and institution of several sector-specific liquidity facilities. Since October 11, 2008, the Reserve Bank reduced CRR by a cumulative 400 basis points to 5.0 per cent of net demand and time liabilities (NDTL), repo rate by 425 basis points to 4.75 per cent and the reverse repo rate by 275 basis points to 3.25 per cent. The nature of injection of liquidity through unwinding of MSS and reduction of CRR ensured the attainment of the Reserve Bank’s objective of maintaining ample liquidity in the system without expanding the balance sheet of the Reserve Bank or compromising on the quality of the assets in the balance sheet.

Monetary Survey

IV.3 On a year-on-year (y-o-y) basis, M 3 growth was 18.9 per cent as on October 9, 2009 as compared with 20.9 per cent a year ago. The growth in M3 mainly reflected the sustained expansion in aggregate deposits during this period. Within aggregate deposits, time deposits registered a growth (y-o-y) of 20.9 per cent as on October 9, 2009 as compared with 21.6 per cent a year ago (Table 4.1 and Chart IV.1). Banks mobilised large time deposits during the third quarter of 2008-09, as investors reallocated their portfolios in favour of bank deposits with the intensification of financial crisis and increase in risk perception in the face of snowballing uncertainty. This period also witnessed a shift from demand deposits to time deposits. Demand deposits that posted a sharp decline in the last two quarters of 2008-09 and registered a growth of only 0.5 per cent at end-March 2009 witnessed a turnaround. Demand deposits expanded by 10.3 per cent (y-o-y) as on October 9, 2009 as compared with 17.7 per cent a year ago. The net outflows from small savings schemes that started in December 2007 continued up to July 2009 (the latest period for which the data are available) (Chart IV.2). Growth in currency with the public moderated to 16.2 per cent (y-o-y) as on October 9, 2009 as compared with 20.1 per cent a year ago, mainly reflecting the impact of moderation in economic activity on currency demand.

Table 4.1: Monetary Indicators

(Amount in Rupees crore)

Item

Outstanding as on October 9, 2009

Variation (year-on-year)

October 10, 2008

October 9, 2009

Absolute

Per cent

Absolute

Per cent

1

2

3

4

5

6

I.

Reserve Money*

10,10,786

1,35,117

17.6

1,09,589

12.2

 

(Reserve Money Adjusted for CRR changes)

   

(22.8)

 

(19.5)

II.

Narrow Money (M1)

12,96,628

1,81,395

18.8

1,52,610

13.3

III.

Broad Money (M3)

51,46,157

7,47,558

20.9

8,17,802

18.9

 

a) Currency with the Public

7,01,417

1,01,095

20.1

97,846

16.2

 

b) Aggregate Deposits

44,40,318

6,46,568

21.0

7,20,413

19.4

 

i) Demand Deposits

5,90,788

80,405

17.7

55,221

10.3

 

ii) Time Deposits

38,49,530

5,66,162

21.6

6,65,192

20.9

VI.

Major Sources of Broad Money

         
 

a) Net Bank Credit to the Government (i+ii)

14,35,356

1,42,385

16.8

4,44,655

44.9

 

i) Net Reserve Bank Credit to Government

5,365

1,05,435

-

36,641

-

 

of which: to the Centre

5,407

1,05,182

-

37,037

-

 

ii) Other Banks’ Credit to Government

14,29,991

36,950

3.8

4,08,014

39.9

 

b) Bank Credit to the Commercial Sector

31,35,885

6,08,888

27.4

3,04,381

10.7

 

c) Net Foreign Assets of the Banking Sector

13,33,575

3,11,273

30.0

-16,445

-1.2

 

d) Government Currency Liability to Public

10,504

975

11.2

849

8.8

 

e) Net Non-Monetary Liabilities of the Banking Sector

7,69,163

3,15,963

58.8

-84,362

-9.9

*: Data pertain to October 16, 2009. Note: Data are provisional.

1
2

IV.4 On a financial year basis, growth in M3 during 2009-10 (up to October 9, 2009) was 8.0 per cent as compared with 7.7 per cent during the corresponding period of the previous year (Table 4.2).

IV.5 A quarter-wise analysis of growth in bank credit shows that expansion in bank credit recovered in the second quarter of 2009-10 from an absolute decline posted in the first quarter, although the expansion of credit remained much lower than the corresponding quarter of the previous year (Chart IV.3).

Table 4.2: Monetary Aggregates - Variations

(Rupees crore)

Item

2008-09 (up to October 10, 2008) 

2009-10 (up to October 9, 2009)

2008-09

2009-10

Q1

Q2

Q3

Q4

Q1

Q2

1

2

3

4

5

6

7

8

9

M3 (1+2+3 = 4+5+6+7-8)

3,10,472

3,82,138

89,283

1,76,379

1,60,487

3,19,987

1,70,385

1,61,408

 

(7.7)

(8.0)

           

Components

               

1.

Currency with the Public

35,161

35,053

35,772

-18,037

40,405

39,813

24,400

2,682

   

(6.2)

(5.3)

           

2.

Aggregates Deposits with Banks

2,79,487

3,48,235

57,621

1,93,902

1,13,039

2,87,103

1,41,942

1,64,282

   

(8.1)

(8.5)

           
 

2.1 Demand Deposits with Banks

-42,805

9,540

-79,325

52,771

-62,157

91,586

-34,409

62,870

   

(-7.4)

(1.6)

           
 

2.2 Time Deposits with Banks

3,22,292

3,38,695

1,36,946

1,41,131

1,75,195

1,95,517

1,76,350

1,01,412

   

(11.3)

(9.6)

           

3.

‘Other’ Deposits with Banks

-4,175

-1,150

-4,110

514

7,044

-6,930

4,044

-5,555

   

(-46.1)

(-20.6)

           
 

Sources

               

4.

Net Bank Credit to Government

91,183

1,58,157

36,124

31,654

1,29,335

1,80,568

1,19,062

63,346

   

(10.1)

(12.4)

           
 

4.1 RBI’s Net Credit to Government

81,933

-56,214

-13

51,360

30,230

93,212

-11,145

-14,953

 

4.1.1 RBI’s Net credit to the Centre

83,006

-56,355

1,430

51,379

29,932

93,657

-11,497

-14,968

 

4.2 Other Banks’ Credit to Government

9,250

2,14,372

36,137

-19,706

99,106

87,356

1,30,207

78,299

5.

Bank Credit to the Commercial Sector

2,52,515

1,22,548

30,811

1,63,138

90,616

1,49,783

-7,737

1,15,625

   

(9.8)

(4.1)

           

6.

NFA of Banking Sector

54,889

-18,609

66,858

7,271

-1,32,461

1,15,385

-37,923

50,120

 

6.1 NFA of the RBI

95,028

2,564

1,03,932

10,336

-1,56,330

86,048

-16,750

50,120

7.

Government’s Currency Liabilities to the Public

431

450

225

206

186

213

254

196

8.

Net Non-Monetary liabilities of the Banking Sector

88,546

-1,19,591

44,735

25,890

-72,811

1,25,961

-96,730

67,879

NFA: Net Foreign Assets.
 Note: 1. Data are provisional.
2. Figures in parentheses are percentage variations.

IV.6 Much of the financial year expansion in broad money (M3) during 2009-10 (up to October 9, 2009) resulted from the increase in commercial banks’ credit to the Government. On the other hand, net Reserve Bank credit to the Centre during 2009-10 (up to October 9, 2009) decreased, reflecting large absorption under the LAF, despite the sizeable decline in outstanding balances under MSS with the Reserve Bank and increase in purchases under OMOs.

IV.7 Non-food credit growth (y-o-y) of scheduled commercial banks (SCBs) that reached its peak in October 2008, witnessed sustained deceleration thereafter, reflecting moderation in economic activity. Non-food credit by SCBs expanded by 11.2 per cent, y-o-y, as on October 9, 2009, lower than 29.4 per cent a year ago and the Reserve Bank’s indicative projected trajectory of 20.0 per cent as set out in the First Quarter Review for 2009-10. The lower expansion in credit relative to the significant expansion in deposits during 2009-10 has resulted in a decline in the incremental credit-deposit ratio (Chart IV.4).

3

IV.8 Though the moderation in credit growth was witnessed across the banking sector, credit growth decelerated sharply for private banks while foreign banks registered a decline (Table 4.3). Theexpansion of credit from the public sector banks has also moderated to some extent.

IV.9 Scheduled commercial banks’ investment in SLR securities expanded by 40.9 per cent (y-o-y) as on October 9, 2009, as compared with 3.2 per cent a year ago, driven by the higher market borrowing by the Government (Table 4.4). This was facilitated by low credit growth and ample liquidity in the system. Commercial banks’ holdings of such securities as on October 9, 2009 at 30.4 per cent of their net demand and time liabilities (NDTL) were higher than 28.1 per cent at end-March 2009 and 25.7 per cent a year ago. Excess SLR investments of SCBs increased to Rs.2,91,279 crore as on October 9, 2009 from Rs.1,69,846 crore at end-March 2009 and Rs.26,933 crore a year ago. SCB’s also increased their investment in non-SLR securities substantially. Simultaneously, SCBs reduced their overseas foreign currency borrowings and increased their holding of foreign currency assets.

4

Table 4.3: Credit Flow from Scheduled Commercial Banks

(Amount in Rupees crore)

Item

Outstanding as on Oct. 9, 2009

Variation (year-on-year)

As on Oct. 10, 2008

As on Oct. 9, 2009

Amount

Per cent

Amount

Per cent

1

2

3

4

5

6

1.

Public Sector Banks

21,44,697

4,58,297

32.7

2,84,513

15.3

2.

Foreign Banks

1,57,601

46,421

32.9

-29,771

-15.9

3.

Private Banks

5,15,474

82,704

19.7

12,402

2.5

4.

All Scheduled Commercial Banks*

28,90,316

5,94,220

29.5

2,80,627

10.8

*: Including Regional Rural Banks Note: Data are provisional.


Table 4.4: Scheduled Commercial Bank Survey

(Amount in Rupees crore)

Item

Outstanding as on October 09, 2009

Variation (year-on-year)

As on October 10, 2008

As on October 09, 2009

Amount

Per cent

Amount

Per cent

1

2

3

4

5

6

Sources of Funds

         

1.

Aggregate Deposits

41,61,354

6,14,272

21.5

6,92,986

20.0

2.

Call/Term Funding from Financial Institutions

98,432

29,097

33.3

-18,058

-15.5

3.

Overseas Foreign Currency Borrowings

27,702

31,244

100.6

-34,586

-55.5

4.

Capital

58,940

8,948

24.5

13,433

29.5

5.

Reserves

3,24,335

60,023

27.2

43,706

15.6

Uses of Funds

         

1.

Bank Credit

28,90,316

5,94,220

29.5

2,80,627

10.8

 

of which: Non-food Credit

28,47,595

5,82,344

29.4

2,86,801

11.2

2.

Investments in Government and Other Approved Securities

13,77,910

30,131

3.2

4,00,027

40.9

 

a) Investments in Government Securities

13,62,250

31,501

3.4

3,96,844

41.1

 

b) Investments in Other Approved Securities

15,661

-1,370

-9.9

3,183

25.5

3.

Investments in non-SLR Securities

2,82,655

-32,157

-17.6

1,31,868

87.5

4.

Foreign Currency Assets

42,662

-6,406

-21.9

19,776

86.4

5.

Balances with the RBI

1,88,727

99,638

45.6

-1,29,595

-40.7

Note: Data are provisional.

IV.10 Growth and inflation conditions changed significantly during the course of 2008-09. In 2009-10 so far, while growth impulses remained subdued, the divergence between WPI and CPI inflation reached a high level. Given such high variability in growth and inflation, money growth may have to be seen in relation to the recent trend in income velocity of money (Chart IV.5).

IV.11 Disaggregated data on sectoral deployment of gross bank credit available up to August 28, 2009 show that 53.8 per cent of incremental non-food credit (y-o-y) was absorbed by industry as compared with 47.5 per cent in the corresponding period of the previous year. The agricultural sector absorbed 21.8 per cent of the incremental non-food bank credit as compared with 8.5 per cent in the corresponding period of the previous year. Personal loans that accounted for 4.1 per cent of the incremental non-food credit witnessed moderation; within personal loans, housing loans decelerated to a large extent. Growth in loans to commercial real estate, however, remained high. Credit card and consumer durables segments exhibited negative growth in credit, which corroborates the sharp decline in private consumption demand as per GDP data for the first quarter of 2009-10. Growth in incremental credit for services activities also exhibited significant deceleration (Table 4.5).

5

Table 4.5: Deployment of Gross Bank Credit by Major Sectors

(Amount in Rs. crore)

Sector

Outstanding as on August 28, 2009

Year-on-Year Variations

August 29, 2008

August 28, 2009

Absolute

Per cent

Absolute

Per cent

1

2

3

4

5

6

Non-Food Gross Bank Credit
(1 to 4)

26,23,551

4,84,805

26.5

3,08,718

13.3

1. Agriculture & Allied Activities

3,29,847

41,185

18.6

67,228

25.6

2. Industry

10,96,764

2,30,229

32.9

1,66,121

17.9

3. Personal Loans

5,64,689

69,763

14.5

12,594

2.3

Housing

2,84,721

29,872

12.4

14,668

5.4

Advances against Fixed Deposits

44,760

2,919

7.0

290

0.7

Credit Card Outstanding

24,889

7,173

32.8

-4,167

-14.3

Education

32,017

6,576

38.2

8,217

34.5

Consumer Durables

7,832

-304

-3.1

-1,571

-16.7

4. Services

6,32,251

1,43,628

33.7

62,775

11.0

Transport Operators

39,250

7,485

26.3

3,264

9.1

Professional Services

46,383

15,114

64.6

7,889

20.5

Trade

1,47,354

22,686

21.3

17,951

13.9

Real Estate Loans

96,701

20,580

43.1

28,353

41.5

Non-Banking Financial Companies

1,01,281

26,443

51.8

23,837

30.8

Memo

Priority Sector

9,27,322

1,46,145

22.7

1,37,965

17.5

Micro and Small Enterprises*

2,77,728

38,013

21.1

59,764

27.4

Industry

10,96,764

2,30,229

32.9

1,66,121

17.9

Food Processing

53,137

11,757

30.4

2,743

5.4

Textiles

1,06,033

17,402

21.9

9,036

9.3

Paper & Paper Products

15,795

3,037

26.6

1,342

9.3

Petroleum, Coal Products and Nuclear Fuels

60,273

29,713

90.7

-2,183

-3.5

Chemicals and Chemical Products

73,303

16,172

30.2

3,546

5.1

Rubber, Plastic & their Products

13,496

2,415

24.9

1,372

11.3

Iron and Steel.

1,08,758

21,177

31.6

20,490

23.2

Other Metal and Metal Products

31,271

5,403

25.7

4,844

18.3

Engineering

61,766

9,941

21.3

5,224

9.2

Vehicles, Vehicle Parts and Transport Equipments

35,850

7,244

27.9

2,657

8.0

Gems & Jewellery

29,141

3,693

15.7

1,890

6.9

Construction

37,421

10,020

47.6

6,354

20.5

Infrastructure

3,03,013

55,533

36.1

93,647

44.7

*: Micro and small enterprises include services sector enterprises also.
Note: Data are provisional and relate to select banks. Data also include the effects of mergers of Bharat Overseas Bank with Indian Overseas Bank, American Express Bank with Standard Chartered Bank and State Bank of Saurashtra with State Bank of India.

IV.12 Apart from banks, the commercial sector mobilised resources from a variety of other sources such as capital markets, issuance of commercial papers (CPs), non-banking financial companies (NBFCs), financial institutions, external commercial borrowings (ECBs), American Depository Receipts (ADRs)/Global Depository Receipts (GDRs) and foreign direct investment. During the first half of 2009-10, flow of resources from external sources was lower as compared with the corresponding period of the previous year, although they were significantly higher as compared to the second half of 2008-09. On the other hand, resources mobilised through domestic non-bank sources recorded an increase during this period with significant increase in issuance of CPs and private placements. Thus, total flow of resources from non-bank sources has recorded an increase during 2009-10 so far as compared with the corresponding period of the previous year (Table 4.6). The total flow of financial resources to the commercial sector, however, remained lower, reflecting moderation in expansion in bank credit to the commercial sector.

Table 4.6: Flow of Financial Resources to Commercial Sector

(Rupees crore)

Item

Full Year

April-September*

2007-08

2008-09

2008-09

2009-10

1

2

3

4

5

A.

Adjusted non-food Bank Credit (NFC)

4,44,807

4,21,091

2,40,092

1,07,861 **

 

i)

Non-Food Credit

4,32,846

4,11,824

2,43,280

1,18,257

   

of which petroleum and fertilizer credit

5,057

31,632

22,391

-9,179 ^

 

ii)

Non-SLR Investment by SCBs

11,961

9,267

-3,188

-10,395

B.

Flow from Non-banks (B1+B2)

5,64,558

4,68,567

2,28,119

2,30,130

 

B1.

Domestic Sources

2,55,230

2,98,351

1,22,518

1,40,213

   

1. Public issues by non-financial entities

51,478

14,205

11,913

13,617

   

2. Gross private placements by non-financial entities

68,249

77,856

17,847

34,790 #

   

3. Net issuance of CPs subscribed by non-banks

10,660

5,590

22,187

51,012

   

4. Net Credit by housing finance companies

41,841

26,634

14,893

8,124

   

5. Total gross accommodation by 4 RBI regulated AIFIs - NABARD, NHB, SIDBI & EXIM Bank

22,267

31,423

7,248

-3,347

   

6. Systemically important non-deposit taking NBFCs net of bank credit

36,460

76,828

37,744

17,990 ^

   

7. LIC’s gross investment in Corporate Debt, Infrastructure and Social Sector

24,275

65,815

10,686

18,027 ^

 

B2.

Foreign Sources

3,09,328

1,70,216

1,05,601

89,917

   

1. External Commercial Borrowings / FCCB

91,180

38,009

10,906

6,486

   

2. ADR/GDR Issues excluding banks and financial institutions

11,836

4,788

4,652

12,645

   

3. Short-term Credit from abroad

68,878

-31,160

21,009

-8,133 ^

   

4. Foreign Direct Investment to India

1,37,434

1,58,579

69,034

78,919 ^

C.

Total Flow of Resources (A+B)

10,09,365

8,89,658

4,68,211

3,37,991

Memo Item:

Mutual Funds Investments in Debt (non-Gilt) Instruments

88,457

-32,168

19,896

1,01,956

**: up to October 9, 2009.   ^: Data pertain to April-August.
*: Comparable period for respective items.  #: Data pertain to April-June.

Reserve Money Survey

IV.13 Growth in reserve money that remained low/negative during the 2009-10 up to the second week of October 2009 registered a growth of 12.2 per cent, y-o-y, as on October 16, 2009 as compared with a growth of 17.6 per cent a year ago. The significant acceleration in growth in reserve money in the week ended October 16, 2009 reflects the reduction in CRR by 250 basis points by the Reserve Bank effective from the fortnight beginning October 11, 2008 and consequent decline in bankers' deposits with the Reserve Bank. The reserve money growth as on October 16, 2009, therefore, is over a lower base that resulted from the reduction in CRR a year ago. Reserve Bank has reduced CRR by 400 basis points since October 2008 to augment domestic liquidity in view of the intensification of global financial crisis and its related impact on domestic markets. The movement in reserve money in the second quarter of 2009-10 was mainly driven by liquidity management operations of the Reserve Bank and variation in bankers' deposits with the Reserve Bank. The growth in reserve money has to be seen along with policy driven changes to the CRR, since the combined impact gets reflected in the growth of broad money. A reduction in CRR may lead to a corresponding fall in reserve money in the first round; the higher money multiplier resulting from lower CRR, however, will lead to higher growth in broad money, though with a lag. When the variation in reserve money reflects the result of a policy driven change in CRR, for the purpose of analytical comparison reserve money adjusted for CRR changes becomes more relevant. Adjusted for the first round effect of the changes in CRR, reserve money growth (y-o-y) as on October 16, 2009 was 19.5 per cent as compared with 22.8 per cent a year ago. The CRR impact explains the difference between 'reserve money' and 'adjusted reserve money' (Chart IV.6).

6
7

IV.14 The money multiplier, which had declined from 4.7 at end-March 2007 to 4.3 at end-March 2008 in the wake of CRR hikes, increased to 4.8 as on March 31, 2009 and 5.4 by end-July 2009, reflecting subsequent lowering of CRR by 400 basis points. The money multiplier at end-September 2009 was 5.3 (Chart IV.7).

IV.15 Reserve money during the financial year 2009-10 (up to October 16, 2009) recorded a growth of 2.3 per cent as against a decline of 2.9 per cent in the corresponding period of the previous year (Table 4.7). On the sources side, both net Reserve Bank credit to the Centre and net foreign assets (adjusted for valuation) increased. Net Reserve Bank's credit to the Centre increased by Rs. 24,123 crore (up to October 16, 2009) as compared with an increase of Rs.15,534 crore during the corresponding period of the previous year. The Reserve Bank's foreign currency assets (adjusted for valuation) increased by Rs.31,150 crore as against a decrease of Rs.34,556 crore during the corresponding period of the previous year (Chart IV.8). Adjusted for the first round impact of the changes in CRR (up to October 16, 2009), reserve money expanded by 2.2 per cent as compared with an increase of 1.8 per cent during the corresponding period of the previous year.

IV.16 Movements in the Reserve Bank's net credit to the Central Government during 2009-10 (up to October 16, 2009) largely reflected the liquidity management operations of the Reserve Bank and changes in Central Government deposits with the Reserve Bank. Liquidity condition eased from mid-November 2008, in response to the liquidity augmenting measures of the Reserve Bank and on an average, Reserve Bank started absorbing large amount of liquidity through reverse repo under the LAF. Accordingly, Reserve Bank's holding of government securities (up to October 16, 2009) declined on account of an increase in absorption under the LAF (Rs.74,775 crore). The Centre's surplus cash balances with the Reserve Bank also increased (Rs.45,124 crore). On the other hand, unwinding of MSS securities (Rs.69,304 crore) led to a decline in Central Government deposits with the Reserve Bank. Furthermore, net open market purchases under OMO/ special market operations (SMO) led to higher holding of Central Government securities/bonds (Rs.74,068 crore) by the Reserve Bank. Reflecting combined effect of these developments, the Reserve Bank's net credit to the Centre increased during 2009-10 (up to October 16, 2009).

Table 4.7: Reserve Money - Variations

(Amount in Rupees crore)

Item

2008-09 (April-March)

2008-09 (Up to Oct.17)

2009-10 (Up to Oct.16)

2008-09

2009-10

Q1

Q2

Q3

Q4

Q1

Q2

1

2

3

4

5

6

7

8

9

10

Reserve Money

59,698

-27,105

22,786

3,416

25,218

-70,453

1,01,517

-38,929

16,100

   

(-2.9)

(2.3)

           

(Adjusted Reserve Money)

 

(1.8)

(2.2)

           

Components (1+2+3)

                 

1. Currency in Circulation

1,00,352

43,226

53,369

36,859

-14,516

38,277

39,733

29,692

976

   

(7.3)

(7.7)

           

2. Bankers’ Deposits with RBI

-37,172

-66,793

-30,973

-29,333

39,219

-1,15,773

68,714

-72,664

20,680

   

(-20.3)

(-10.6)

           

3. ‘Other’ Deposits with the RBI

-3,482

-3,538

390

-4,110

514

7,044

-6,930

4,044

-5,555

   

( -39.1)

(7.0)

           

Sources (1+2+3+4-5)

                 

1. RBI’s net credit to Government

1,74,789

15,196

23,153

-13

51,360

30,230

93,212

-11,145

-14,953

of which: to Centre (i+ii+iii+iv-v)

1,76,397

15,534

24,123

1,430

51,379

29,932

93,657

-11,497

-14,968

2. RBI’s Credit to Banks and Commercial Sector

17,799

5,886

-17,520

-3,358

4,963

5,032

11,163

-9,623

-3,747

3. Net Foreign Assets of RBI

43,986

93,402

10,144

1,03,932

10,336

-1,56,330

86,048

-16,750

50,120

   

(7.6)

(0.8)

           

of which :

                 

FCA, adjusted for valuation

-1,00,308

-34,556

31,150

15,535

-31,641

-92,102

7,900

-6,245

33,441

4. Governments’ Currency Liabilities to the Public

831

431

450

225

206

186

213

254

196

5. Net Non-Monetary liabilities of RBI

1,77,706

1,42,021

-6,558

97,369

41,648

-50,430

89,119

1,664

15,516

Memo:

 

Net Domestic assets

15,712

-1,20,507

12,641

-1,00,516

14,882

85,877

15,469

-22,178

-34,020

LAF- Repos (+) / Reverse Repos(-)

-51,835

-41,710

-74,775

-45,350

51,480

-62,170

4,205

-1,32,800

28,170

Net Open Market Sales # *

-94,548

-19,227

-74,068

-8,696

-10,535

-7,669

-67,649

-42,001

-31,591

Centre’s Surplus

-60,367

-43,130

45,124

-42,427

6,199

-32,830

8,691

-13,156

77,713

Mobilisation under the MSS

-80,315

1,103

-69,304

6,040

-628

-53,754

-31,973

-65,187

-4,117

Net Purchases(+)/Sales(-) from Authorised Dealers

-1,78,592

-73,331

-14,385^

3,956

-52,761

-1,11,877

-17,910

-15,889

1,504 ^

NFA/Reserve Money @

129.6

147.5

127.6

143.8

141.1

134.7

129.6

133.1

136.1

NFA/Currency @

185.2

209.7

173.3

213.5

220.2

183.3

185.2

175.3

182.0

NFA: Net Foreign Assets.  FCA: Foreign Currency Assets.  LAF: Liquidity Adjustment Facility.
* : At face value.  # : Excludes Treasury Bills.  @ : Per cent; end of period.  ^ : up to August 28, 2009.
Note: 1. Data are based on March 31 for Q4 and last reporting Friday for all other quarters.
2. Figures in parentheses are percentage variations during the fiscal year.


8

IV.17 To sum up, the growth-supportive accommodative monetary policy stance was evident from sustained high growth in broad money notwithstanding the recent moderation, and also the daily absorption of excess liquidity in excess of Rs.1,00,000 crore on average throughout the second quarter of 2009-10. High growth in deposits on the component side and high growth in investment of the banking system in government securities in the wake of large market borrowing programme of the Government on the sources side have been the major drivers of growth in monetary aggregates. Moderation in non-food credit growth continued. Momentum in capital inflows and revival in demand for credit from the private sector could, however, alter the monetary conditions over time.

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