Lending by the financial institutions increased significantly to Rs 5,786 crore in March 1998 as against Rs 3,408 crore in the corresponding period last year. However, it had declined to Rs 4,803 crore by July 17, 1998. Lending by public sector banks (PSB) in the call money market also came down by 30.5 per cent to Rs 2,938 crore in the fortnight ended March 27, 1998, as against Rs 4,229 crore last year. However, lending rebounded to Rs 5,119 crore during the fortnight ended July 17, 1998.

Borrowing by foreign banks from the call money market increased from Rs 3,996 crore during last fortnight of March, 1997, to Rs 5,131 crore in March, 1998, which further increased to Rs 6,035crore during the fortnight ended July 17, 1998.

During this period, primary dealers' (PDs') borrowing increased by 49.8 per cent to Rs 4,398 crore as against Rs 2,934 crore last year. Their borrowing further increased to Rs 4,465 crore during the fortnight ended July 17, 1998.In the last one year, the number of participants in the call market has also increased. The RBI has permitted 17 corporate entities to operate as lenders in the market through primary dealers.

During the first three quarters of 1997-98, owing to easy liquidity conditions, interest rates softened. This saw a reduction in the outstanding amount of certificates of deposit (CDs). The outstanding amount of CDs issued by scheduled commercial banks (SCB) declined substantially from Rs 12,134 crore as on March 28, 1997 to Rs 6,607 crore by December 19, 1997.

However, the outstanding amount of CDs increased sharply to Rs 14,296 crore by the fortnight ended March 27, 1998, owing to tight money market conditions as a result of the RBImeasures announced on January 16, 1998, which created heavy demand for funds by banks. However, CD outstanding declined to Rs 7,287 crore by July 17, 1998.

During this period, investments in commercial paper by scheduled commercial banks increased sharply. THe outstanding amount of CPs increased from Rs 646 crore on March 31, 1997, to Rs 5,249 crore as on January 15, 1998,but declined to Rs 1,500 crore as on March 31, 1998.

Banks' investments in government securities fell to 30.9 per cent of aggregate deposits as on the last Friday of March 1998 as against 31.4 per cent last year. In incremental terms this ratio was 28.1 per cent in 1997-98 as against 37.1 per cent in 1996-97.