Credit slows to 22% from 31.9%: RBI

Written by Banking Bureau | Mumbai, Jan 28 | Updated: Jan 29 2008, 05:39am hrs
Growth in bank credit moderated after the strong pace in the preceding three years, the Reserve Bank of India(RBI) on Monday said in its report titled Macroeconomics and Monetary Developments: Third Quarter Review of 2007-08.

Non-food credit by scheduled commercial banks (SCBs) moderated to 22.2% at Rs 3,82,155 crore, Y-o-Y, as on January 4, 2008 from 31.9% or Rs 4,16,418 crore, a year ago.

During the third quarter of 2007-08, international financial markets remained volatile as uncertainties about the US sub-prime mortgage market and other credit markets exposures persisted.

Indian financial markets remained generally orderly for the most part of the third quarter of 2007-08 except for some volatility in the equity market. Swings in cash balances of the government and capital flows were the main drivers of liquidity conditions in the financial markets.

Liquidity conditions continued to be influenced by movements in capital flows and cash balances of the governments with the RBI managing liquidity through increase in the cash reserve ratio (CRR), issuances of securities under the market stabilisation scheme (MSS) and operations under liquidity adjustment facility (LAF).

The cumulative rainfall during the South-West monsoon season 2007, June 1 to September 30, was 5% above normal as compared with one per cent below normal during the corresponding period of the previous year. Cumulative rainfall during the North-East monsoon (October 1, 2007 to December 31, 2007) was 32% below normal as compared with 21% below normal during the corresponding period of the previous year. The reported sown area of kharif crops (up to October 26, 2007) increased by 2.7%, while that of rabi crops (up to January 18, 2008) was about 3.7%, lower than a year ago.

Central government finances for 2007-08 (April-November), key deficit indicators, viz, revenue deficit and GFD, were placed lower than those in the corresponding period of the previous year, both in absolute terms and per cent of the budget estimates.

Apart from the lower revenue deficit, contraction in defence capital outlay also moderated the fiscal deficit. There was a primary surplus of Rs 7,374 crore during April-November 2007 as compared with a budgeted surplus of Rs 8,047 crore.

Gross and net market borrowings (including 364-day Treasury Bills) of the central government during 2007-08 (up to January 25, 2008) were Rs 1,73,429 crore and Rs 1,03,092 crore, respectively, accounting for 91.8% and 94.1% of the estimated borrowings for the year.

During 2007-08 (up to January 25, 2008), the states raised market loans amounting to Rs 47,449 crore through auctions, as compared with Rs 14,204 crore during the corresponding period of the previous year.

Global commodity prices firmed up during the third quarter of 2007-08 led by food and crude oil prices, although there was some moderation in prices of metals.

International crude oil prices, represented by the West Texas Intermediate (WTI), touched a historical peak of $99.6 a barrel level on January 2, 2008.