Money continues to pour into bank deposits, even as credit demand and bank investments in bonds show signs of slowing. The easing of demand is reflected in the huge surplus that banks are parking with the central bank under its daily reverse repo.
Bankers say an anticipation of further rate cuts has prompted customers to invest in term deposits. The countrys largest bank, State Bank of India (SBI), has reduced deposit rates across maturities from the first week of May.
Also, many other smaller banks have reduced their deposit rates. According to RBI figures, banks have gone slow in lending. Loans have dipped Rs 25,266 crore during the fortnight to Rs 27,46,175 crore as on April 24. Non-food credit dipped by Rs 27,493 crore during the fortnight.
The flight to safety in the currency market has resulted in the dollar strengthening thereby reducing the value of Indias foreign exchange reserves in dollar terms. Forex reserves, which include gold and special drawing rights with the International Monetary Fund, fell by $1.4 billion to touch $251.7 billion during the week ended May 1, 2009.