MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI BALASAHEB VIKHE PATIL)
(a),(b) and (c ) : A Statement is laid on the Table of the House.
STATEMENT REFERRED IN REPLY TO PARTS (A), (B) AND (C) OF THE LOK
SABHA STARRED QUESTION NO. 269 BY S/SHRI NAWAL KISHORE
RAI AND G.S.BASAVARAJ FOR REPLY ON 7.12.2001 REGARDING BANK
CREDIT TO COMMERCIAL SECTOR
(a) : As per information available with the Reserve Bank of India, non-food bank credit of
scheduled commercial banks during the year 2001-2002 upto July 27, 2001 increased by Rs.
1,715 crore compared to an increase of Rs. 14,482 crore during the corresponding period of the
prevous year.
(b) : The expansion of bank credit and other flows to the commercial sector from the banking
system remained sluggish due to subdued industrial growth and depressed investment demand.
The non-food bank credit of scheduled commercial banks has however, increased by Rs.4,024
crore, Rs.3,913 crore and Rs.12,751 crore, respectively during months of August, September and
October 2001 (on the basis of the last reporting Friday of each month).
(c ) : On a review of macroeconomic and monetary developments, the Reserve Bank of India
(RBI) reduced Bank Rate by 0.50 percentage point from 7.0 per cent to 6.50 per cent with effect
from the close of business on October 22, 2001 as a part of monetary policy measures which are
announced six monthly. Cash Reserve Ratio (CRR) was also reduced by 200 basis points to 5.50
per cent from 7.50 per cent of net demand and time liabilities (NDTL). Effective from the fortnight
beginning November 3, 2001, CRR will be reduced to 5.75 per cent; and effective fortnight
beginning December 29, 2001, the CRR will be reduced further to 5.50 per cent of NDTL.
It is expected that these changes will facilitate the development of a short term yield curve,
develop money market, reduce the regulatory arbitrage between banks and non-banks, enhance the
availability of lendable resources with the banks and improve the efficiency of indirect instruments
in the conduct of monetary policy. At the present level of NDTL, the combined impact of the
above two measures will result in augmenting lendable resources of the banking system by about
Rs.8,000 crore (about Rs.6,000 crore effective from November 3, 2001).
