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RBI CREDIT TO CENTRAL GOVERNMENT GOES UP
The Economic Survey 2009-10 states that during 2009-10, the banking system’s credit to the Government was the major driver of growth in broad money (M3). The increase in government’s borrowing programme to finance expansionary fiscal response to the economic slowdown was the underlined reason. However M3 growth has shown signs of deceleration after September, 2009. Among the sources of M3, bank credit to the commercial sector, which had been decelerating since October 2008 has shown a revival since November, 2009. During 2009-10, bank credit recorded an increase of 8.4 percent(end March to January, 2010). As against this, bank deposits recorded an increase of 10.7 percent during the same period. This has resulted in a decline in the credit-deposit(C-D) ratio which fell down 72.4 in end March, 2009 to 70.92 on January 15, 2010.
Net RBI credit to the Central Government increased by Rs. 29,638 crore during the financial year ( up to January 15, 2010). This was mainly on account of unwinding of Market Stabilisation Scheme (MSS) balances and open market operations of the Reserve Bank, offset by increase in the cash balances of the Central Government and reverse repo operations. On year-on-year basis, increase in the net RBI credit to the Central Government as on January 15, 2010, was Rs. 1,19,895 crore as against an increase of Rs. 1,27,184 crore during the corresponding period a year ago. On year-on-year basis, as on January 15, 2010, the growth of currency with the public was marginally higher at 17.3 percent as compared with 17.2 per cent on the corresponding date a year ago. During the same period, growth in demand deposits accelerated to 19.8 percent as compared with a decline of 0.8 percent a year earlier. As on January 15, 2010, currency with the public expanded by 12.3 per cent over end-March, 2009, as against as increase of 12.2 percent during the corresponding period of the preceding year.
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