Forex reserves fall; bank credit rises

The country’s forex kitty got lighter by nearly $8 billion in a single week.
The reserves have been dwindling for the past few weeks following sustained FII outflows from the domestic equity market. This coupled with selling of dollars by the Reserve Bank of India, took the forex reserves down by more than $1 billion in the last one month.
According to figures released by the RBI on Friday, forex reserves plunged by $7.87 billion to touch $283.941 billion for the week ended October 3.
The fall could be partly attributed to dollar selling by the RBI in the forex markets to stabilise the rupee, said Mr Ashish Parthasarathy, Deputy treasurer, HDFC.
In the previous week, reserves had decreased by $153 million to touch $291.819 billion.
According to the figures released by the Securities and Exchange Board of India, foreign institutional investors have been net sellers in the equity markets to the tune of Rs 416.80 crore for the week ended October 3, which also led to the decline in forex reserves, said dealers.
Foreign currency assets decreased by $7.741 billion to $274.911 billion. Gold reserves decreased by $127 million to $8.565 billion, while SDRs were unchanged at $4 million.
Credit growth
Despite the talk of the fund crunch , total bank credit for the fortnight ended September 26 grew by Rs 51,219 crore, to touch Rs 25,42,467 crore, according to the RBI figures.
Of this, non-food credit grew by Rs 51,234 crore to Rs 24,97,292 crore, while food credit fell by Rs 15 crore to Rs 45,175 crore.
Bank credit grew by 24 per over the previous year, which is above the RBI’s target of 20 per cent.
For the same fortnight, aggregate deposits grew by Rs 36,761 crore to touch Rs 34,42,138 crore. The growth in deposits is 19.8 per cent over the previous year.
According to a senior official from a leading public sector bank, the increase in credit could be attributed to the fertiliser subside disbursal, which was committed earlier. Oil companies were also borrowing from banks and rolling over the money, he said.

via:B.L