Emkaynomics Fortnightly round up of key banking and economic indicators ·

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Emkaynomics

Fortnightly round up of key banking and economic indicators

·      Non-food credit growth at 16.1% yoy (along the expected lines) is on a downward trajectory for long now. On YTD basis, growth came in at mere 10% against 15% YTD for the corresponding period of previous year

·      Deposit growth at 15.7% yoy too came in as a disappointment. Demand deposits growth continues to remain fragile at mere 0.5% yoy. Demand deposits are down 7% YTD against 11% YTD growth in overall deposits

·      Lower deposit growth has attributed for CD ratio improving to 75%+ levels. Inc. CDR came in at 73% levels. Money supply growth has eased to 14% yoy. With M1 growth at 6% yoy, the ratio of M3/M1 has eased to 4.3x levels

·      Rs700bn+ of OMO operations since November, 2011 coupled with recent 50bps CRR cut (Jan’2012) has eased bond yields by over 60bps from their recent high. 10-yr/1-yr G-sec stood at 8.2%/8.0% as at 13th Feb, 2012

·      However, LAF window continues to remain in deficit mode with net borrowing running high at ~Rs1.6tn (2.6% of NDTL). Liquidity is expected to remain tight given year-end credit growth phenomena and borrowing programme

·      Call money rates averaged 8.8% for the fortnight ended 27th Jan, 2012. However, since then, they have eased to 8.5% levels. The spread of 10-yr Gsec over AAA corporate bond continues to remain at ~100bps+.

·      With easing WPI Inflation (Dec’11 at 7.5%) and lower IIP growth (Dec’11 at 1.8%), we believe there is a strong case for further CRR cuts and monetary policy easing