ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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MONEY AND BANKING-Heavily Touched-Up Picture

 MONEY AND BANKING Heavily Touched-Up Picture MONETARY expansion was faster in February than in the previous month or in February 1979. Money supply with the public (M1) rose sharply by Rs 480 crores or 2 per cent as against a smaller rise of Rs 218 crores or 0.9 per 'cent in January; in February last year money stock had declined by Rs 219 crores or 1 per cent. Of the components of money supply, currency expanded by as much as Rs 342 crores and deposit money by Rs 138 crores, whereas in February 1979 currency had shown a rise of Rs 119 crores and deposit money had declined by Rs 338 crores. Bank lending to private sector was the major factor pushing up monetary expansion in February. Lending and investment by commercial and co-operative banks together expanded by Rs 466 crores in contrast to a contraction of Rs 315 crores in February last year. Interestingly, bank credit to government sector rose by a much smaller amount of Rs 135 crores as compared with a rise of Rs 1,076 crores in January. The smaller rise is ascribable to the rise in government deposits by Rs 537 crores.What is more, almost the entire increase has been on account of Reserve Bank credit to government with the commercial and co-operative banks together adding a paltry sum of Rs 3 crores to their lending to government sector over the month. This trend again raises the question of the reliability of banking data for policy purposes (March 15, p 542), Foreign assets of the banking sector, which fell by Rs 124 crores, imparted a moderating influence on monetary expansion.

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