12.30        ndian    onom
     treated as capital flows, the underlying economic          Data on M0 are published by the RBI on weekly
     reality may point otherwise. In the Indian context,   basis, while those for M1 and M3 are available on
     it may not be appropriate to exclude all categories   fortnightly basis. Among liquidity aggregates, data
     of non-resident deposits from domestic monetary       on L1 and L2 are published monthly, while those
     aggregates as non-resident rupee deposits are         for L3 are disseminated quarterly. The working
     essentially integrated into the domestic financial    group advised for the quarterly publication of
     system. The new monetary aggregates, therefore,       Financial Sector Survey to capture the dynamic
     exclude only non-resident repatriable foreign         linkages between banks and rest of the organised
     currency fixed deposits from deposit liabilities      financial sector.
     and treat those as external liabilities. Accordingly,
     from among the various categories of non-resident     liQuiDity of money
     deposits at present, only Foreign Currency Non-       As we move from M1 to M4 the liquidity (inertia,
     Resident Accounts (Banks) [FCNR(B)] deposits          stability, spendability) of the money goes on
     are classified as external liabilities and excluded   decreasing and in the opposite direction, the
     from the domestic money stock. Since the bulk         liquidity increases.
     of the FCNR(B) deposits are held abroad by
     commercial banks, the monetary impact of changes      nArroW money
     in such deposits is captured through changes in net   In banking terminology, M1 is called narrow
     foreign exchange assets of the commercial banks.      money as it is highly liquid and banks cannot run
     Thus, now the new monetary aggregates NM2 and         their lending programmes with this money.
     NM3 as well as liquidity aggregates L1, L2, and L3
     have been introduced, the components of which         broAD money
     are elaborated as follows:                            The money component M3 is called broad money
     NM1 = Currency with the Public + Demand               in the banking terminology. With this money
              Deposits with the Banking System +           (which lies with banks for a known period) banks
              ‘Other’ Deposits with the RBI.               run their lending programmes.
     NM = NM1 + Short Term Time Deposits of
          2
              Residents (including the contractual
                                                           money suPPly
              maturity of one year).                       In general discussion we usually use money supply
     NM = NM2 + Long-term Time Deposits of
          3                                                to mean money circulation, money flow in the
              Residents + Call/Term Funding from           economy. But in banking and typical monetary
              Financial Institutions.                      management terminology the level and supply
                                                           of M3 is known as money supply. The growth
     L1 = NM3 + All Deposits with the Post Office
                                                           rate of broad money (M3), i.e., money supply, was
              Savings Banks (excluding National
                                                           not only lower than the indicative growth set by
              Savings Certificates)
                                                           the Reserve Bank of India, but it also witnessed
     L = L1 + Term deposits with Term Lending
       2
                                                           continuous and sequential deceleration in the
              Institutions and Refinancing Institutions    last 7 quarters and moderated to 11.2 per cent
              (FIs) + Term Borrowing by FIs +              by December 2012. Aggregate deposits with the
              Certificates of Deposit issued by FIs        banks were the major component of broad money
     L = L2 + Public Deposits of Non-Banking
       3
                                                           counting for over 85 per cent remaining almost
              Financial Companies.                         stable. The sources of broad money are net bank