2.15 The outstanding amount of Certificates of Deposit (CDs) issued by scheduled commercial banks declined from Rs.1,273 crore as on April 21, 2000 to Rs.872 crore as on May 5, 2000. Consequent upon the reduction in the minimum maturity period of CDs to 15 days, with effect from May 3, 2000, CD market picked up and the outstanding amount of CDs issued by SCBs peaked to Rs.1,695 crore as on October 20, 2000. However, as on October 5, 2001, outstanding amount of CDs declined to Rs.823 crore.

2.16 Reflecting the trends in other segments of money market, the typical discount rates (for 3 months maturity) on CDs, which had declined from 11.0 per cent as on April 7, 2000 to 8.5 per cent as on June 16, 2000, started rising and ranged between 10.0 per cent and 10.5 per cent during August - November 2000. Thereafter, reflecting easy liquidity condition, following IMD flows, the discount rates declined from 10.25 percent during the fortnight ended November 17, 2000 to 8.5 per cent in the fortnight ended March 23, 2001 and the outstanding amount of CDs declined gradually to Rs.771 crore as on March 23, 2001. The typical discount rate on CDs with a maturity of one year increased from 10.25 per cent as on March 23, 2000 to 10.50 per cent as on October 20, 2000 and remained there till March 23, 2001. Discount rates on CDs in general, which ranged between 6.3 - 14.1 percent as on October 20, 2000, ranged between 5.5 - 11.0 per cent as on March 23, 2001 (Appendix Table II.2). As on October 5, 2001, the discount rate on CDs ranged between 6.0 per cent and 9.3 per cent.

2.17 During the year under review, credit extended by SCBs recorded a growth of 17.3 per cent (Rs.75,476 crore), on top of the rise of 18.2 per cent recorded in the previous year. Food credit showed an increase of 55.7 per cent during 2000-01 as compared with the increase of 52.8 per cent during 1999-2000. Non-food credit increased by 14.9 per cent (Rs.61,176 crore) in 2000-01 as compared with the rise of 16.5 per cent in 1999-2000. The credit-deposit ratio in terms of outstandings, moved down marginally to 53.1 per cent as on March 23, 2001from 53.6 per cent as on March 24, 2000. Non-food credit adjusted for non-SLR investments of banks, including bills rediscounted with financial institutions, recorded a growth rate of 16.1 per cent to Rs.5,48,071 crore as at end-March 2001 on top of the growth of 17.8 per cent in the previous year. The (adjusted) non-food credit-deposit ratio in terms of outstandings, was 56.9 per cent as at end-March 2001 as compared with 58.1 per cent as at end-March 2000 (Table II.6 and Table II.7).

2.18 During 2001-02 (upto October 19, 2001) bank credit registered a lower growth of 6.4 per cent (Rs. 32,691 crore) than that of 9.7 per cent (Rs.42,168 crore) in the comparable period of the previous year. Food credit increased by 25.7 per cent (Rs. 10,289 crore) as against an increase of 31.7 per cent (Rs. 8,154 crore) recorded during the comparable period of 2000-01. Non-food credit growth at 4.8 per cent (Rs. 22,402 crore) was lower than that of 8.3 per cent (Rs. 34,014 crore) during the same period of 2000-01. Growth in non-food credit adjusted for SCBs non-SLR investments was lower at Rs. 25,947 crore upto October 19, 2001 as compared with Rs. 37,535 crore during the corresponding period of the previous year, showing a year-on-year growth rate of 12.3 per cent as on October 19, 2001 as against 19.3 per cent as on October 20, 2000. Bank credit (adjusted)- deposit ratio, on the basis of outstandings, was placed lower at 59.5 per cent as on October 19, 2001 as against 61.2 per cent on October 20, 2001.

2.19 Investments of SCBs in government and other approved securities increased by 19.8 per cent (Rs.61,216 crore) in 2000-01 as compared to a rise of 21.3 per cent (Rs.54,350 crore) in 1999-2000 (Table II.6). On an incremental basis, investment by SCBs in government and other approved securities was equal to 41.0 per cent of their deposits during 2000-01. As on March 23, 2001, SCBs were holding excess investment of about Rs.1,06,000 crore in SLR eligible securities over the statutory prescription of 25 per cent. The investment-deposit ratio, on an outstanding basis, increased to 38.5 per cent as on March 23, 2001 from 38.0 per cent as on March 24, 2000.

2.20 The investments of scheduled commercial banks in government and other approved securities increased by 12.3 per cent (Rs. 45,385 crore) during 2001-02 (upto October 19, 2001) as compared with a rise of 8.2 per cent (Rs. 25,459 crore) in the comparable period of 2000-01. The investment-deposit ratio, on an outstanding basis, increased to 39.6 per cent as on October 19, 2001 from 37.6 per cent as on October 20, 2000.

2.21 During 2000-01, bank credit increased by Rs. 75,476 crore (17.3 per cent). While food credit increased by Rs.14,300 crore, non-food credit posted a growth of Rs. 61,176 crore (14.9 per cent). Investments by banks in CPs, shares/ bonds/debentures of PSUs and private corporate sector along with bills rediscounted with financial institutions recorded a growth of Rs.14,713 crore (23.8 per cent) as against Rs.13,067 crore (26.8 per cent) in the previous year. Together with these investments, the increase in total flow of resources to commercial sector excluding food credit from SCBs amounted to Rs.75,888 crore (16.1 per cent) in the financial year 2000-01 as compared with the increase of Rs.71,313 crore (17.8 per cent) in the previous year. SCBs' investments in instruments issued by financial institutions and mutual funds increased by Rs. 1,703 crore during 2000-01 as compared with Rs. 3,660 crore in the previous year. Including resource flow through capital issues, GDRs and financial institutions, the commercial sector could raise Rs.1,65,056 crore during 2000-01 compared with Rs.1,60,381 crore in 1999-2000.

2.22 During 2001-02, including non-food credit, investments by banks in CPs, shares/ bonds/debentures of PSUs and private corporate sector, alongwith bills rediscounted with financial institutions and resource flows through capital issues, GDRs and financial institutions, the commercial sector could raise Rs. 67,923 crore upto October 19, 2001, which was lower than the flow of Rs. 81,199 crore in the corresponding period of 2000-01.

2.23 There was some improvement in activity relating to bill rediscounting during 2000-01. The outstanding amount of commercial bills rediscounted by commercial banks with various financial institutions at Rs.1,013 crore at the end of March 2001 was higher than that of Rs.439 crore during the previous year. The outstanding amount of bills rediscounted was Rs. 1,370 crore in August 2001.

2.24 There have been sharp increases in volumes in Forward Rate Agreements (FRAs)/ Interest Rate Swaps (IRS) market during 2000-01. The available data indicate that FRAs/IRS transactions, both in terms of number of contracts and outstanding notional principal amount, increased from 216 contracts amounting to Rs.4,249 crore as on March 24, 2000 to 1,521 contracts for Rs.21,504 crore as on March 23, 2001. During the current financial year 2001-02, this market has expanded further to 2,537 contracts amounting to Rs.41,309 crore as on September 7, 2001. Though there is a significant increase in the number and amount of contracts, participation in the market continued to be restricted mainly to foreign and private sector banks, PDs and all-India financial institutions. In a majority of these contracts, NSE-MIBOR was used as a benchmark rate.

2.25 The sectoral deployment of gross bank credit during 2000-01 reflects deceleration in credit growth to industry (medium and large) to 10.5 per cent (Rs.15,518 crore) in 2000-01 as compared to 12.9 per cent (Rs.16,803 crore) in the previous year. A similar deceleration was evident in the case of credit to wholesale trade also (6.1 per cent in 2000-01 as against 20.4 per cent in 1999-2000). The growth in credit to 'other sectors' also slowed down to 18.8 per cent in 2000-01 from 19.8 per cent in the previous year. Among other sectors, while the credit to housing, non-banking financial companies, loans to individuals against shares/bonds, non-priority personal loans, advances against fixed deposits and tourism and tourism related hotels decelerated, the credit to real estate sector accelerated. The credit to priority sector registered a growth of 17.1 per cent (2000-01) as against 15.0 per cent (1999-2000). Within the priority sector, credit to other priority sector increased substantially by 34.2 per cent (Rs. 11,858 crore) followed by agriculture by 17.0 per cent (Rs. 7,541 crore) while credit to small scale industries decelerated to 6.0 per cent (Rs.3,188 crore). Export credit recorded a rise of Rs. 4,203 crore (10.7 per cent) and formed 9.3 per cent of the net bank credit during 2000-01 in comparison with a rise of Rs. 3,227 crore (9.0 per cent) during the previous year, constituting 9.8 per cent of the net bank credit (Table II.8).

2.26 The industry-wise credit growth during 2000-01 was the highest in infrastructure at 56.7 per cent (Rs. 4,106 crore), followed by petroleum at 29.0 per cent (Rs. 2,603 crore), gems and jewellery at 21.7 per cent (Rs. 1,175 crore), electricity at 15.5 per cent (Rs. 1,152 crore) and cotton textiles at 13.4 per cent (Rs. 1,562 crore). On the other hand, credit deployment to seven industries (out of 26 industries) showed declines during 2000-01; the major declines were in 'other textiles' at Rs.991 crore (7.6 per cent) and drugs and pharmaceuticals at Rs.304 crore (5.3 per cent). Industrial credit as a percentage of net bank credit decreased to 46.8 per cent in 2000-01 from 50.3 per cent in 1999-2000. The growth in credit to industry decelerated to 9.3 per cent (Rs.18,706 crore) in 2000-01 from 11.8 per cent (Rs.21,134 crore) in 1999-2000 (Table II.9).

2.27 The number of sick/weak industrial units financed by SCBs declined to 3,07,399 as at end-March 2000 from 3,09,013 a year ago. As at the end of March 2000, the outstanding bank credit to these industrial units increased by 21.5 per cent to Rs. 23,656 crore. At this level, bank credit to sick/weak industries as a proportion of the bank credit to the total industrial sector stood at 11.9 per cent as at end-March 2000, as against 10.9 per cent as at end-March 1999 (Appendix Table II.3).

2.28 As per BSR data¹ the credit-deposit (C-D) ratio of SCBs as on March 31, 2001 (as per sanctions)² stood at 58.5 per cent as compared with 56.0 per cent as at end-March 2000. The total flow of resources as reflected in the credit and investment to deposit (IC-D) ratio showed an increase (as per utilisation) for the northern and western regions as at end-March 2000. The IC-D ratio was highest for the western region (78.6 per cent), followed by the southern (75.5 per cent) and the northern (54.8 per cent) regions (Appendix Table II.4).

2.29 The overall exposure of SCBs to the sensitive sector comprising capital market, real estate and commodities³ stood at Rs.22,318 crore which was 4.3 per cent of total loans and advances as at end-March 2001. Lending to the commodities sector accounted for the largest share of advances of banks within the sensitive sectors (42.0 per cent), followed by real estate (36.8 per cent) and the capital market (21.2 per cent). New private sector banks had an exposure at 11.0 per cent, of their total loans and advances to the sensitive sectors, followed by old private banks (7.7 per cent), nationalised banks (4.3 per cent), foreign banks (4.2 per cent) and the State Bank group (2.0 per cent) (Table II.10).

2.30 As on March 31, 2001, there were 11 public sector banks and 19 private sector banks listed for trading on the National Stock Exchange. Movements in bank share prices are given in Table II.11. The share of bank scrips in the total turnover of NSE declined to 1.0 per cent in 2000-01 from 3.7 per cent in 1999-2000 (Table II.12).