September 15 2017

Money Supply India

By fortnight ending 18th August 2017, the money supply (M3) growth decelerated to 7% YoY from 7.1% in the previous month.

Published fortnightly by the Reserve Bank of India (RBI) and updated by IMA by the last fortnight of every month. Updated till August 18th, 2017. (Updated on September 1st, 2017)

Recent Data Trend

The M3 measure of money supply growth in India moderately decelerated to 7.1% YoY, reaching an all time high of Rs.129.2 trillion for the fortnight ending August 18th, 2017.

Among the components of money supply, time deposits recorded a growth of 8.5% YoY, a marginal fall from 8.6% YoY growth in the previous month, reaching a total of Rs.101.9 trillion by August 18th, 2017. Similarly, the growth in time deposits fell to 23.2% in August from 24.4% in July. Alongside, the currency with public rose to Rs.14.9 trillion, reaching 87.5% of the pre-demonetisation (October 2016) level.

Among the sources of money supply, net bank credit to government rose by 12.7% YoY a slight pick up from 12.1% YoY growth by the end of previous month. The growth in credit to government has been falling since February 2017. Also, growth in total bank credit to commercial sector remained flat at 5.7% YoY.

Brief Overview
In India, the measures and definition of money stock have continuously evolved since independence (1947). The First Working Group 1961 (FWG) of RBI for the first time threw some light on the concept of money supply in India emphasizing the role of money as a liquid asset and a medium of exchange.

Later on, in 1977 the Second Working Group (SWG) of RBI developed four measures of money stock M1, M2, M3, and M4. However, with the advent of new financial institutions, the Third Working Group (TWG) felt the need for a broader measure of money supply and redefined financial institutions to include banking sector, insurance corporations, mutual funds, non-banking financial companies (NBFCs) accepting deposits from the public and development financial institutions (DFIs). Consequently, TWG broadened the scope of the measure of the money stock. For more information on the evolution of methodology of the compilation of money stock measures, please visit this link.

March 2006 witnessed an unprecedented growth in demand deposits with banks (42% YoY) and a substantial growth in money supply (21.1% YoY). The growth in deposits, credit and money supply went beyond the RBI's projections signaling a caution. This forced the then RBI governor Y. Venugopal Reddy to increase the reverse repo and the repo rate to 6% and 7%, respectively.

RBI compiles and publishes data on M1, M2, M3, and the M4 measure of money supply fortnightly and uses M3 as the official measure of money supply.

For more information please visit the official government website.

Next Release Date: October 11th, 2017