MUMBAI, Feb 14: Bank credit grew by 1.7 per cent (Rs 5,160 crore) while deposits grew only by 0.5 per cent (Rs 3,054 crore) during the fortnight ended January 30, 1998. This is the fourth consecutive fortnight that credit pick-up has far outstripped deposit growth.The growth in bank credit started outstripping deposit growth during the fortnight ended December 19, 1997 when deposits recorded a slump of Rs 1,489 crore on account of the withdrawal of funds by corporates to fund political parties in the coming elections.
The growth in bank credit has improved the credit-deposit ratio of the banking system which has gone up from 51.62 per cent on November 28, 1997 to 53.93 per cent on January 30. This is despite the RBI measures to suck out liquidity from the system and jack up domestic interest rates. The CRR hike sucked Rs 2,400 crore out of the banking system and sent the overnight call rates zooming.
Meanwhile, bank investments dipped by Rs 3,854 crore for the fortnight. With call rates soaringto dizzy heights, banks turned distress sellers in gilts and treasury bills, while the investors were mainly FIs, insurance companies, mutual funds and a few select corporates.
Call rates, however, declined towards the end of the fortnight ended January 30, as most of the banks had covered their positions. The money market is likely to remain uneasy until the next credit policy, industry watchers said. Barring the fortnight ended January 16 when banks' investments witnessed a nominal growth of Rs 210 crore , there has been a continuous fall in investments over the past two months.
Meanwhile, the total forex reserves have fallen by $ 96 million to $27.74 billion. Foreign currency assets dipped by $ 99 million to $ 24.36 billion while gold reserves rose by $ 3 million to $ 3.32 billion.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
