The Reserve Bank of India (RBI) in its annual policy for the year 2008-09 wants M3 expansion to be moderated in the range of 16.5-17% during 2008-09.
Accordingly, it has projected deposits to increase by around 17% or Rs 5,50,000 crore during 2008-09.
The adjusted non-food credit projected to increase by around 20% during 2008-09, said RBI.
The money supply (M3) increased by 20.7 % (Rs.6,86,096 crore) in 2007-08 as compared with 21.5 % (Rs.5,86,548 crore) in 2006-07.
The reserve money increased by 30.9% (Rs.2,19,326 crore) during 2007-08 as compared with 23.7 % (Rs.1,35,935 crore) in the previous year.
The aggregate deposits of SCBs increased by 22.2 % (Rs.5,80,208 crore) during 2007-08 as compared with 23.8 $ (Rs.5,02,885 crore) in the previous year.
The non-food credit extended by the scheduled commercial banks (SCBs) increased by 22.3 % (Rs.4,19,425 crore) as compared with 28.5 % (Rs.4,18,282 crore) in the previous year.
The incremental non-food credit-deposit ratio for the banking system declined to 72.3 % during 2007-08 from 83.2 % in 2006-07, 109.3% in 2005-06 and 130% in 2004-05.
The total flow of funds from SCBs to the commercial sector, including non-SLR investments, increased by 21.9 % (Rs.4,31,256 crore) in 2007-08 as against 27.3% (Rs.4,22,363 crore) in 2006-07.
The total overhang of liquidity as reflected in the balances under the LAF, the MSS and surplus cash balances of the central government taken together increased to the intra-year peak of Rs 2,73,694 crore on March 27, 2008 before declining to Rs 2,43,879 crore on April 25, 2008.
The movements in interest rates in the domestic financial markets reflected the factors driving changes in liquidity with the banking system during 2007-08, the central bank said.
The sustained strength of capital flows during 2007-08 is noteworthy as the foreign exchange reserves increased by $ 110.5 billion to $ 309.7 billion by end-March 2008.
The Indian foreign exchange market witnessed generally orderly conditions during 2007-08 with the exchange rate exhibiting two-way movements.
The rupee appreciated by 9.1% against the dollar and by 7.5% against pound sterling but depreciated by 7.7% against the Japanese yen and by 7.8% against the euro during 2007-08.
The average daily turnover in the foreign exchange market increased to $57.3 billion at end-March 2008 from $ 33.2 billion at end-March 2007.
Commercial banks’ investment in government and other approved securities increased by 22.9 % (Rs.1,81,222 crore) during 2007-08, significantly higher than 10.3 % (Rs 74,062 crore) in 2006-07.