Growth in reserves and yield

Ample liquidity resulted in lower call rate

The foreign currency assets grew by $10 million to $252.8 billion. Forex reserves grew by $ 8 million to $ 263.652 billion for the week ended June 19, as per the RBI's latest weekly statistical supplement. The total reserve comprises of foreign currencies, gold and special drawing rights with IMF. The gold and SDR reserves unchanged at $ 9.604 billion and $1 million respectively.

The annual growth rate in reserve money was a mere 2% as on 19 June 2009 compared with 29.3% growth recorded last year. The reserve money fell 1.8% from their previous week level and stood at Rs 950308 crore as on 19 June 2009.Bankers deposit with RBI, one of the major component of reserve money fell 26.9% as on 19 June 2009 compared with 55.4% growth recorded a year ago. It recorded a negative growth of 24.9% in so far current financial year as against 8.9% decline in same period a year ago. The annual growth rate of currency in circulation also decelerated to 14.8% as compared to 20.5% growth in a year ago. In so far current financial year it move up 4.3% as against 6.2% increase in same period a year ago.

Net foreign exchange assets of RBI, one of the major sources of reserve money, recorded 5.7% fall on 19 June 2009 compared with 55.2% surged a year ago. It decline 1.3% in so far current financial year compared with 8.4% increase in same period a year ago.

The Reserve bank has accepted 6 bids during the week ended 19 June 2009 under liquidity adjustment facilities. Under the reverse repo auction, RBI has absorbed amount worth Rs 648700 crore at the cut of rate 3.25%. The weighted average rate of call money was below 4% indicating sound liquidity position. The annual growth rate of money supply as on 20.2% as on 5 June 2009 compared with 21.7% last year. However headline inflation is in red for two consecutive weeks. Inflation and bond yield have positive relationship. However yield on most traded paper remain on elevated level due to the higher government borrowing.