KEY MEASURES
* Hikes banks' SLR to 25% of NDTL effective from Nov 7
* CRR, reverse repo, repo rate kept unchanged
* Ups Mar-end WPI inflation estimate to 6.5% with upside bias
* FY10 GDP growth projection unchanged at 6.0% with an upside bias
* Cuts FY10 credit growth projection to 18% from 20% Jul policy
* Cuts FY10 money supply growth estimate to 17% vs 18% earlier
* Cuts FY10 non-food credit growth estimate to 18% from 20%
* Banks' aggregate deposits likely to grow 18% FY10
* Not desirable to hike HTM as it is higher vs SLR
* Scraps refinance window for banks to fund MFs, NBFCs
* Scraps foreign exchange swap facility for banks
* Use of special refinance facilities low
STANCE
* Liquidity situation remained comfortable since Nov
* Hike in SLR not to impact liquidity position of banks
* Third quarter policy review scheduled on Jan 29
* To be prepared for swift, effective response to inflation
* Need to keep vigil on inflation trends
* Need to monitor liquidity situation closely, actively
* To maintain a rate regime supportive of growth process
* Mindful of fundamental commitment to price stability
* Will continue to monitor price situation in entirety
* Will take steps swiftly on evolving macroeconomic conditions
* Definitive indications of econ reverting to growth track
* Focus has shifted to managing recovery from crisis mgmt
* Policy dilemma differs in some aspects from other economies
* India actively confronted with upturn in inflation
* Confronted with rising WPI, "stubbornly" elevated CPI
* Reviving local consumption, investment demand a challenge
* Supply constraints may re-emerge, become "binding"
* India's current account deficit "modest"
* Need to make responsible, time bound fiscal adjustment
* Critical need to "downsize" govt borrow to sustain low rates
* Investment demand pick up crucial for long-term econ prospect
* "Exit" a central issue in "policy matrix"
* Need to reverse expansionary stance
* Current stance is not steady state
* India's Exit debate "qualitatively different" from other economies
* Challenge to support recovery without compromising price stability
* Need careful mgmt of trade-offs to support growth, stability
* Growth drivers "warrant a delayed exit"
* Inflation concerns "call for an early exit"
* "Premature exit will derail the fragile growth"
* "Delayed exit can potentially engender inflation expectation"
* Consulted wide array of stakeholders in policy review run up
* On FY basis, WPI has already risen 5.95%
* Dominant argument to reverse stance due to inflation worry
* Forceful argument for early reversal on liquidity worry
* Liquidity bulge may cause unsustainable asset price build-up
* Capital flows have resumed
* Evidence of excess liquidity feeding through asset prices
* Liquidity overhang could engender inflation expectation
* "Premature tightening will hurt the growth impulses"
GOVERNMENT BORROWING
* Feedback from market showed OMO gave "considerable comfort"
* Current liquidity situation should smoothen rest of govt borrow
INFLATION
* Metals' price fall accentuated gap in CPI-WPI inflation rate
* Interest rates in all markets declined significantly
* Low policy rates transmitted to credit market with a lag
* Rise in equity, easy global finances bode well for investment
* Rabi season critical for food inflation going forward
* Large food stocks may mitigate impact of supply constraint
* See greater volatility in global commodity prices coming yrs
* Extent of CPI inflation fall not as expected
* Inflation conditions not "adequately" reflected in WPI, CPI
* To anchor inflationary expectations, ensure price stability
* Policy conduct to continue to perceive 4.0-4.5% inflation
GROWTH
* Low rainfall to impact kharif season
* Farm output during rabi season critical for supply
* Farm output FY10 seen lower vs year ago
* Industrial output prospects more promising now vs Jul policy
BANKS
* Policy steps since Sep upped liquidity by 5.85 trln rupees
* Banks urged to step up efforts towards credit expansion
* Ups banks' provisioning for realty exposure to 1.0% vs 0.4%
* See wide gap among banks' provisioning coverage ratio
* Advises banks to augment provisioning for NPAs
* Banks must keep at least 70% provision coverage ratio
* Banks must keep 70% coverage ratio by Sep end
* 70% coverage ratio includes floating provisions
* Risk weight on banks exposure to infra NBFCs linked to NBFC rtg
* Banks must hold loans at least 1-yr before securitising
* Originators must retain 10% of securitised loans
* OKs banks to open branches in Tier-3 to Tier-6 cities
* Banks branches in Tier-1, Tier-2 need prior OK
* To issue norms on Basel-II enhancements by Nov end
* Norms on duration gap analysis for asset-liability management Nov
* To issue norms on private, foreign banks' compensation
* To issue draft norms on liquidity risk mgmt Dec end
* To issue norms on banks' stress testing by Jan end
* Panel report on micro, small companies credit guarantee by Dec end
* Reimbursed 64.7% of banks farm loans under debt waiver so far
* To consider BPLR panel recommendations post feedback
* Final norms on corporate bond repos by Nov end
* Cuts limit on export credit finance to 15% vs 50%
MARKET DEVELOPMENT
* To issue norms on NCDs below 1-yr by Nov end
* Norms on NCDs to be similar to commercial papers
* To start plain credit default swaps soon
* To finalise norms on credit swaps post market feedback
* To issue floating rate bonds FY10 as per market appetite
* OKs bourses to start futures in euro/rupee, Yen/rupee
* OKs bourses to start futures in pound sterling/rupee
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