ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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MONEY AND BANKING-Aiming to Please

MONEY AND BANKING Aiming to Please CONTINUING the seasonal decline which has been noticed since July 1982, M1 contracted further by Rs 105 crore or 0.7 per cent in September 1982. The size of the decline was however smaller than that in the preceding month (Rs 222 crore) or in September 1981 (Rs 241 crore). The fall was largely visible in currency (Rs 184 crore), and to some extent in 'other deposits with the RBI' (Rs 28 crore), while demand deposits with banks showed an expansion of Rs 47 crore. In September 1981 all the components had shared in the decline in M,. Time deposits with banks increased by Rs 183 crore in the month under review, less than one-half of the rise of Rs 371 crore recorded in September 1981. Consequently M3 grew by a much smaller amount (sec Table). The decline in M1 was brought about by a sizeable fall in net bank credit to government as also by drawing down of foreign exchange assets. Bank credit to commercial sector on the other hand showed a substantial increase during the month. Government borrowings from the banking sector were down by Rs 694 crore: the decline in credit to government from commercial and cooperative banks accounted for as much as Rs 551 crore of this decline and that in borrowings from the RBI for Rs 143 crore. The disinvestment by batiks in government securities has taken place in the context of pick up in demand for credit from the commercial sector which rose by an amount slightly higher than in September 1981. Net foreign exchange assets of the banking sector, the decline in which was Rs 368 crore as compared with Rs 108 crore last year, also aided the contraction in M1 Disregarding the entitlement usable under the IMF line of credit a' Rs 3,500 crore, the foreign exchange reserve is now equivalent to about three? months' import requirements as against 10 months' requirements in

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