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Change in Expectations
Contrary to expectation, the easy spell in the interbank call money market in Bombay has been sustained. Fears of a shrinkage of supplies, following advance quarterly tax payments on September 1, have been proved false. Indeed, at the time of writing this the market appears to be easier than ever before.
Contrary to expectation, the easy spell in the interbank call money market in Bombay has been sustained. Fears of a shrinkage of supplies, following advance quarterly tax payments on September 1, have been proved false. Indeed, at the time of writing this the market appears to be easier than ever before.
The change in market expectations has stemmed from the belief that the Reserve Bank is grooming the market for the ensuing State Government floatations. There is no evidence of such grooming, however. There is not much buying of securities by the central bank. The explanation for the prevailing easiness lies in the rapid expansion of deposits with scheduled banks and a sustained contraction in bank credit. Perhaps such inflow of resources stemmed from heavy payments by the Central Government during the week ended August 19, when Central Government deposits with the Reserve Bank fell by Rs 46 crores to Rs 79 crores.
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