Hinting at the continuation of tight monetary policy, the Reserve Bank of India (RBI) in its report on Macroeconomic and Monetary Developments in 2007-08 on Monday has said reserve money growth was higher at 30.9% year-on-year, as on March 31, 2008, than 23.7% a year ago, reflecting the year-end liquidity requirements of the banks.
Adjusted for the first-round impact of the hike in the cash reserve ratio, the reserve money growth was 25.3 % as compared with 18.9 % a year ago.
Broad money growth (M3), on a year-on-year (y-o-y) basis, was at 20.7% (Rs. 6,86,096 crore) as at end-March 2008 as compared with 21.5% (Rs. 5,86,548 crore) a year ago. Aggregate deposits of banks, y-o-y, increased by 21.2 % (Rs 5,99,687 crore) as at end-March 2008 as compared with 22.3% (Rs 5,16,134 crore) a year ago.
Growth in bank credit moderated during 2007-08 after the strong pace in the preceding three years. Non-food credit by scheduled commercial banks (SCBs) expanded by 22.3 % (Rs.4,19,425 crore), y-o-y, as on March 28, 2008 as compared with 28.5 % (Rs.4,18,282 crore) a year ago.
Gross Domestic Saving (GDS), as percentage of GDP at current market prices, was placed at 34.8% in 2006-07 as compared with 34.3% in 2005-06, reflecting improved saving performance by the private corporate and public sectors.
On the other hand, the household saving rate declined marginally in 2006-07 from the previous year on account of decline in the financial saving rate. The sales and net profits of Reserve Bank?s sample non-government non-financial companies moderated during 2007-08 (up to December 2007) relative to the previous year. However, gross profits to sales ratio improved marginally over the same period. Industrial growth moderated during April-February 2007-08 primarily reflecting the performance of manufacturing sector.
The chairman of the state-run State Bank of India (SBI), OP Bhatt, meanwhile has said that in case there is any interest rate hike, few of the banks would pass on the burden to their customers, whereas the remaining banks will try to absorb it themselves. Talking to reporters on the sidelines of the 100th annual general meeting of the Indian Merchant of Chambers in Mumbai on Monday, Bhatt said that ?any decision in connection with rate hike can be taken during the meetings of the assets and liability committees of the banks only.’ Secondly, it all depended on the signals coming from the policy announcement by the RBI, said Bhatt.