Fortnightly round up of key banking and economic indicators · :Emkay

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Fortnightly round up of key banking and economic indicators

·      Non-food credit growth at 15.7% yoy is on a decline and appears lower primarily due to higher base of the previous year (24.2% yoy). On qoq basis, the growth came in at 6.4%. On YTD basis, growth is up 11%

·      …resultant, RBI target of 18% yoy for FY12 appears on higher end. On other hand, growth in total deposits at 17% yoy is well within RBI target zone. Demand deposits were up 14% over previous fortnight and flat YTD

·      CD ratio has remained steady at 75% levels for past several fortnights. Inc. CDR came in at 70% levels. Money supply growth improved to 16% yoy. With M1 growth at 7% yoy, the ratio of M3/M1 has eased to 4.26x levels

·      Liquidity remained tight with net outflow at ~Rs1.5tn (2.6% of NDTL) as on Jan-16. The additional borrowing programme with expectation of credit growth up-tick is likely to keep LAF in deficit mode in H2FY12

·      Rs560bnof OMO operations have enabled 10-yr/1-yr G-sec to ease by ~60bps+ from their recent highs. However, tight liquidity with higher borrowing programme will hold the yield curve at current levels

·      Call money rates have eased to 8.6% levels. The spread of 10-yr Gsec over AAA corporate bond has remained at ~100bps.

·      WPI Inflation for Dec’11 came in at 7.5% levels. Given the backdrop of sharp decline in inflation and the slow down in the IIP growth (3.8% YTD), we believe that there is a strong case for the RBI to initiate a CRR cut