The underlying factor is continuing credit pick-up from banks which will slowly squeeze excess liquidity from the system and put pressure on the interest rates for bank lending. Though there may not be any immediate impact on markets, this can serve as an important lending indicator in the near future, the report adds.

In absolute terms, the increase in bank credit since October 9, 1999 has been Rs 14,726 crore compared to an increase of Rs 13,089 crore in bank deposits. The incremental credit-deposit ratio (ICOR) for this period has, therefore, crossed 100 per cent, from a level of 80 per cent in the first week of October, 1999.

However, the destination of this credit remains uncertain with no signs of an industrial recovery yet. Rollover of earlierborrowings or funding of inventory levels could be two areas which have been consuming the credit off-take from banks, the report added.