MUMBAI, Dec 25: The net Reserve Bank of India (RBI) credit to the Centre recorded a surplus of Rs 5,964 crore from April to October 10 in 1997 against an increase of Rs 6,486 crore recorded during the corresponding period in 1996.

The surplus in the monetised deficit was essentially the result of the Centre's investment of its cash balances in dated securities held by the RBI to the tune of Rs 14,595 crore, according to the RBI report on currency and finance, 1996-97.

This is notwithstanding the Reserve Bank's subscriptions to fresh dated securities worth Rs 7028 crore and the funding of the Rs 7143 crore of tap Treasury bills held outside the Reserve Bank into special securities. The monetised deficit recorded a peak surplus level at Rs 10,255 crore on August 29, 1997.

During the period up to October 10, 1997, the reserve money registered a growth of Rs 5369 crore (2.7 per cent) in sharp contrast to the decline of Rs 6,951 crore (3.6 per cent) during the corresponding period of 1996-97. This was mainly on account of continued increase in capital flows during the period.

Accordingly, RBI's net foreign exchange assets increased sharply by Rs 13,289 crore (14.0 per cent), compared with the increase of Rs 8528 crore (11.5 per cent) during the same period in 1996-97, reflecting Reserve Bank's sustained purchase of dollars amounting to Rs 16,852 crore during this fiscal up to October 10. The broad money (M3) supply exibited strong growth of Rs 53,409 crore (7.6 per cent) in the first half of 1997-98 -- up to October 10 -- as compared with Rs 40,998 crore (6.8 per cent) during the corresponding period of 1996-97. This was mainly on account of the lagged effects of substantial reductions in CRR in 1996-97 and the continued increase in capital inflows during the period, said the RBI report.

On an annualised basis, the M3 growth rate was, however, higher at 16.8 per cent as on October 10, than the 15.9 per cent during the corresponding period the previous year, reflecting the sustained reduction in reserve requirements. Currency with the public increased by Rs 8496 crore (6.4 per cent) while aggregate deposits continued to record a high growth of Rs 44353 crore (7.9 per cent). The net bank credit to the government remained buoyant at Rs 21,809 crore (7.6 per cent) as compared with Rs 19,007 (7.4 per cent) recorded during the corresponding period of 1996-97.

Relecting the easy liquidity in the system, their banks' investments in government securities increased by Rs 30, 755 crore over this period, with scheduled commercial banks' incremental investment in government securities accounting for as much as 129 per cent of the increase in total bank credit to the government during the first half of 1997-98. The banks' incremental deposit stood at only 72.8 per cent during the first half of 1996-97.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.