RBI, governor YV Reddy on Tuesday identified growth in monetary aggregates and liquidity as major twin issues which are closely being monitored. ?We are monitoring the money supply carefully,? he told reporters on the sidelines of the banking conclave BANCON 2007. ?The major issues that have been in our mind are monetary aggregates and liquidity. Otherwise, there is a better balance between deposits and credit growth.?
Reddy also said inflationary pressures were persisting due to high oil prices and food prices globally. As on November 9, money supply was up 23.8% on year and was up by 10.9% from April. RBI had projected money supply to grow at 17-17.5% in 2007-08 while the latest figure on money supply showed it at 23.8%. Reddy said the RBI is not worried over a slowdown in credit growth and that credit growth is ?where it wanted it to be.?
The Reserve Bank is closely watching the global monetary developments and the money supply ?very carefully,? said Reddy. On capital flows, Reddy said, ?Every country has to respond to the capital flows with its own measures.? The RBI governor said that domestic factors in the Indian economy were on expected lines.
Reddy cautioned banks against excessive reliance on call money borrowings, saying, ?it (the bank) may not be able to continue in the inter-bank market, in case of failure to repay the loan,? and may also lead to market perception that ?the bank is having fundamental problems.? Reddy also said that the recent turbulence in the global financial markets were not a total surprise to the Reserve Bank, as the regulator had put a special focus on financial stability in its recent policy statements.