Though credit utilisation by Public Sector Enterprises (PSEs) had been on the rise during FY09, it stood at a modest total of Rs 64 billion by March 28, 2009 compared with Rs 62 billion a month ago on February 28 and just Rs31.5 billion during July 1, 2007 to March 29, 2008.
Last week, all of a sudden, it soared to Rs 142.5 billion and firmly held the ground a week later on 11th April at more or less a similar total, according to the latest update made available on April 20, 2009. In contrast, credit utilization by private sector proper which stood at Rs133 billion on 28th February but stood squeezed to Rs 97 billion on 28th March, 2009 declined to a mere Rs 47.5 billion on 4th April and remained more or less at that level on 11th April.
The development with regard to the PSEs appeared a strange phenomenon vis-à-vis the private sector which towed the line it should have been in recessionary conditions. Incremental borrowing by Public Sector Enterprises surprisingly surged to Rs 142.5 billion on April 04, a jump of Rs 78.5 billion in just one week. May be, PSEs were borrowing too much just to pay off its past debts to the government thereby easing government's budgetary position through its non-tax receipts.
All in all, non-government sector's utilisation of bank credit, which stood at Rs161 billion during FY09 to March 28, rose to Rs 190 billion on 4th April, a level it maintained on 11th April, 2009 as well. In the meanwhile, government sector's borrowing which had risen to Rs 227 billion on 4th April posted a sharp rise over the following week to reach Rs 268 billion on 11th April. The rise of Rs 41 billion was shared among budgetary borrowing (up Rs 34.5 billion) and commodity operations (up Rs 6.5 billion).
While commodity operations are financed by scheduled banks alone, budgetary borrowing is financed by both the State Bank as well as the scheduled banks although it is desirable that such borrowing is provided by banks or still better by non-banks to arrest inflation. Over the week, share of the State Bank rose from Rs 114 billion on 4th April to Rs 124 billion on 11th April while that of the scheduled banks also increased from about Rs 101 billion to Rs 126 billion on 11th April.
In the past many weeks, improvement or deterioration of liabilities side of the OINs of the banking system had either contributed to a decline in domestic credit or to a rise in it. Only last week, domestic credit expansion was supplemented by a build-up of other liabilities under the OINs. This week, a deterioration in other liabilities under OINs reflected by an increase in their negative balance from Rs 129 billion to Rs 143 billion, contributed to a deceleration in domestic credit expansion amounting to some Rs 14 billion.
Read with all these developments, the domestic incremental loan portfolio of banks at Rs 315 billion indicated an increase of Rs 27 billion over the week. However, the incremental addition in domestic credit over the week was almost entirely accounted for by the Government sector whose borrowing rose by Rs 41 billion as non-government sector remained more or less unchanged at previous week's level while OINs of the banking system contributed to a net contraction of Rs 14 billion.
Since NFA of the banking system deteriorated by another Rs 8 billion over the week to minus Rs 220 billion, net monetary expansion during the year to 11th April at Rs 94 billion or a little over 2 percent posted an increase of Rs 18.5 billion.
Component-wise, currency in circulation over the week increased by over Rs 6 billion to Rs162.5 billion while deposit money increased by over Rs 12 billion with overall squeeze in deposit money during the year standing lower at Rs 68.5 billion.
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