MONETARY POLICY 2011-12

Repo rate hiked by 50 bps from 6.75% to 7.25%

Reverse Repo rate hiked by 50 bps from 5.75% to 6.25% (dependent

variable on the Repo rate 100 bps below the Repo rate)
CRR kept unchanged at 6%

SLR kept unchanged at 24%

GDP growth projection for FY 2011-12 placed at around 8% (in the range of 7.4% and 8.5%)

CONT FY 2011-12 March end WPI inflation baseline projection

placed at 6% with an upward bias M3 growth projected at 16%, deposit growth at 17% and non-food credit growth at 19% Bank rate kept unchanged at 6%. MSF introduced at 1% above the Repo rate (8.25%) LAF corridor width set at 200 bps (with base at reverse repo 6.25% & ceiling at MSF 8.25%) MP 2011-12.docx

FIRST QUARTERLY REVIEW

Increase / (Decrease) since March 2010 At present

Repo Rate Reverse Repo Rate

.5% .5%

8%.
7%

Cash Reserve Ratio Unchanged Statutory Liquidity Unchanged Ratio Bank Rate
Unchanged

6%.
24% 6%

KEY FEATURES
GDP growth projection for FY 2011-12 kept unchanged at

around 8% Inflation projection for March end FY 2011-12 revised upwards to 7% from 6%

SECOND QUARTERLY REVIEW

Increase / (Decrease) At present

Repo Rate Reverse Repo Rate Cash Reserve Ratio Statutory Liquidity Ratio Bank Rate

.25% .25%. Unchanged Unchanged

8.5% 7.5% 6% 24% 6%

Unchanged

KEY FEATURES
RBI lowered the growth forecast for 2011-12 from 8% to 7.6% (in line with our expectations) Inflation forecast is kept at 7% by Mar-12 end. Money supply and Credit growth maintained at 15.5% and 18% respectively Depreciation of the rupee has emerged as another risk for inflation. Indian economy continued to face suppressed inflation as prices are administered in petroleum sector.

Increase / (Decrease)

At present

Repo Rate Reverse Repo Rate Cash Reserve Ratio Statutory Liquidity Ratio

Unchanged Unchanged

8.50% 7.50% 5.50% 24.00%

.50%

Unchanged

Bank Rate

Unchanged

6.00%

KEY FEATURES
The drop in November 2011 WPI inflation to 9.11%, mainly due

to softening in food inflation (4.35% for the week ended December 3, 2011) GDP growth rate has fallen to 6.9% from 7.7%(expected in Q2) Due to sharp moderation in industrial growth to -5.1% The fiscal deficit at 74.4% of budgeted 2011-12 was significantly higher than 42.6% in 2010-11

CONT FDs (Fixed Deposits) are offering interest

in the range of 7.25% - 9.40% p.a. Projection of GDP growth for 2011-12 is revised downwards from 7.6% to 7%. In reducing the CRR,INR 320 bn of primary liquidity will be injected into the banking system

INFLATION RATE 2011

RBI projections in three reviews in 2011-12

Table 1: RBI Projections in Monetary Reviews (in %)

May-11

Jul 11

Oct-11

Growth (2011-12) 8

7.6

Inflation (Mar-12) 6
M3 (Mar-12) Deposit (Mar-12) Credit (Mar-12) 16 17 19

7
15.5 18

7
15.5 18

or 2 0 1 1. d oc x

PRESENTATION BY