Bank Credit Darts Up By Rs 4,312 Crore

Bank credit has shown a significant growth of 1.3 per cent for the fortnight ended September 25, the highest in the financial year so far.

In absolute terms, bank credit grew by Rs 4,312 crore during the fortnight and the outstanding bank credit stood at Rs 3,28,132 crore, according to the weekly statistical supplement (WSS) released by the Reserve Bank of India on Saturday. In the fortnight ended September 11, the growth in bank credit was pegged at Rs 150 crore.

The climb was mainly due to an increase in non-food credit, which bloated by Rs 4,258 crore during the fortnight. Against this, food credit grew only by a paltry Rs 54 crore.

The year-on-year increase in investments of banks in government and other approved securities showed a significant climb of 18.7 per cent against 9.6 per cent witnessed as of the previous fortnight.

During the past fifteen days, bank investments rose by Rs 8,035 crore or 3.3 per cent, against Rs 1,253 crore or 0.5 per cent, in the previous fortnight.

This could be because of the auction of 6- and 10-year papers that took place for a total amount of Rs 4,000 crore on September 7.

There was, however, no change in investments of banks in corporate papers.

On the deposits side, there was a 1.4 per cent expansion in aggregate deposits within the banking system. Deposits stood at Rs 6,64,006 crore as of September 25, ascending at a rate of 21.5 per cent year-on-year. This is marginally lower than the year-on-year growth in deposits as of September 11, at 22.1 per cent. There was a further slowdown in the net RBI credit to government, which showed a 4.6 per cent rise for the week ended September 25 (or Rs 6,510 crore), against 2.6 per cent (or Rs 3,740 crore) in the previous week. In absolute terms, this stood lower at Rs 1,36,419 crore against Rs 1,42,929 crore in the previous week.

Other things being equal, this could have a sobering effect on the growth rate of money supply for the next fortnight, which has been climbing at a clip of 19.4 per cent, year-on-year. There was not much of a variation in the foreign currency reserves which stood at $29.18 billion as on September 30, against $ 29.21 billion as on September 25.

The marginal decline was due to a fall in the foreign currency assets which was lower by $69 million during the week compared with an increase by $118 million in the previous week. There was a slight addition in the stock of gold by $43 million to $2.98 billion during the week.