Phenomenal Growth in Non-monetary Liabilities

There has been a mismatch between increases in deposit liabilities and bank credit in the current fiscal which has an explanation in the phenomenal increases in non-monetary liabilities of the banking system. This growth in non-monetary liabilities has tended to finance bank credit. The RBI's non-monetary liabilities have shown extraordinary increases due to sterilisation measures but the corresponding numbers for the banking system are much larger. Primarily, the banks are financing assets based on various forms of non-monetary liabilities. To an extent this is explained by the transformation of IDBI into a commercial bank. But a good part of the increase took place before IDBI became a commercial bank. It is likely that sizeable amounts of float money are emerging as a source for banks to expand commercial lending.