Reserve bank of india – annual report

Report of the Central Board of Directors on the working of the Reserve Bank of India for the year ended June 30, 2011 submitted to the Central Government in terms of Section 53(2) of the Reserve Bank of India Act, 1934 RESERVE BANK OF INDIA ANNUAL REPORT 2010-2011 CENTRAL BOARD / LOCAL BOARDS GOVERNOR D. Subbarao DEPUTY GOVERNORS Shyamala Gopinath1 Usha Thorat2 K. C. Chakrabarty Subir Gokarn Anand Sinha3 H. R. Khan4 MEMBERS OF LOCAL BOARDS WESTERN AREA Y. H. Malegam K. Venkatesan Dattaraj V. Salgaocar Jayantilal B.

Patel DIRECTORS NOMINATED UNDER SECTION 8 (1) (b) OF THE RBI ACT, 1934 Y. H. Malegam Suresh D. Tendulkar5 U. R. Rao Lakshmi Chand DIRECTORS NOMINATED UNDER SECTION 8 (1) (c) OF THE RBI ACT, 1934 H. P. Ranina Azim Premji Kumar Mangalam Birla Shashi Rajagopalan6 Suresh Neotia A. Vaidyanathan M. M. Sharma Sanjay Labroo EASTERN AREA Suresh D. Tendulkar5 A. K. Saikia Sovan Kanungo Md. Sohrab9 NORTHERN AREA Mitha Lal Mehta10 U. R. Rao Ram Nath Pritam Singh Kamal Kishore Gupta11 Mihir Kumar Moitra12

DIRECTOR NOMINATED UNDER SECTION 8 (1) (d) OF THE RBI ACT, 1934 Ashok Chawla7 R Gopalan 8 1 2 3 4 5 6 Term expired on June 20, 2011 Term expired on November 9, 2010 Assumed office on January 19, 2011 Assumed office on July 4, 2011 Expired on June 21, 2011 Expired on August 5, 2011 SOUTHERN AREA Lakshmi Chand C. P. Nair M. Govinda Rao Devaki Jain 7 8 9 10 11 12 Retired on January 31, 2011 Appointed on February 15, 2011 Ceased to be in Office w. e. f. May 13, 2011 Term ended on September 23, 2010 Appointed on August 26, 2010 Appointed on September 24, 2010 Position for the year 2010-11 (updated till August 11, 2011)

PRINCIPAL OFFICERS (As on August 11, 2011) EXECUTIVE DIRECTORS ……………………………………………………… ……………………………………………………… ……………………………………………………… ……………………………………………………… ……………………………………………………… ……………………………………………………… ……………………………………………………… ……………………………………………………… …………………………………………………….. V. K. Sharma V. S. Das G. Gopalakrishna Deepak Mohanty S. Karuppasamy R. Gandhi P. Vijaya Bhaskar B. Mahapatra G. Padmanabhan Rajesh Verma, Chief General Manager Deepak Singhal, Chief General Manager-in-Charge G. Jaganmohan Rao, Chief General Manager-in-Charge A. I. Killawala, Press Relations Officer (Gr. F) N. Krishna Mohan, Chief General Manager B. M. Misra, Officer-in-Charge Deepa Srivastava, Chief General Manager M. S. Deb, Chief General Manager A. K. Bera, Chief General Manager-in-Charge A. S.

Ramasastri, Chief General Manager Uma Subramaniam, Chief General Manager-in-Charge Vijay Chugh, Chief General Manager A. B. Chakraborty, Officer-in-Charge G. Mahalingam, Chief General Manager Rabi N. Mishra, Chief General Manager Meena Hemchandra, Chief General Manager-in-Charge Sandip Ghose, Chief General Manager-in-Charge Karuna Sagar, Chief General Manager K. K. Vohra , Chief General Manager G. S. Hegde, Principal Legal Adviser Janak Raj, Adviser-in-Charge K. R. Ananda, Chief General Manager Ramakant K. Gupta, Deputy General Manager Deepali Pant Joshi, Chief General Manager-in-Charge Grace E.

Koshie, Chief General Manager & Secretary A. Udgata, Chief General Manager-in-Charge Kaza Sudhakar PRINCIPALS Kamala Rajan J. Sadakkadulla REGIONAL DIRECTORS N. S. Vishwanathan Salim Gangadharan J. B. Bhoria Chandan Sinha Sudarshan Sen Uma Shankar P. K. Panda B. K. Bhoi Jasbir Singh Surekha Marandi A. S. Rao B. P. Kanungo K. K. Saraf Bazil Shaikh Amarendra Sahoo Phulan Kumar M. K. Singh Suma Varma OFFICERS-IN-CHARGE A. K. Pandey, General Manager S. Bhatnagar, General Manager V. S. Bajwa, General Manager E. E. Karthak, General Manager C. V. George, General Manager M. A. R.

Prabhu, General Manager Nirmal Chand, General Manager H. N. Panda, General Manager R. Gurumurthy, General Manager D. P. Sharma, Deputy General Manager CENTRAL OFFICE Customer Service Department …………………………………………………… Department of Banking Operations and Development ………………….. Department of Banking Supervision …………………………………………… Department of Communication ………………………………………………….. Department of Currency Management …………………………………………

Department of Economic and Policy Research ……………………………. Department of Expenditure and Budgetary Control ………………………. Department of External Investments and Operations ……………………. Department of Government and Bank Accounts ………………………….. Department of Information Technology ……………………………………….. Department of Non-Banking Supervision …………………………………….. Department of Payment and Settlement Systems ………………………..

Department of Statistics and Information Management ………………… Financial Markets Department …………………………………………………… Financial Stability Unit ………………………………………………………………. Foreign Exchange Department ………………………………………………….. Human Resource Management Department ……………………………….. Inspection Department ……………………………………………………………… Internal Debt Management Department ……………………………………….

Legal Department …………………………………………………………………….. Monetary Policy Department ……………………………………………………… Premises Department ……………………………………………………………….. Rajbhasha Department …………………………………………………………….. Rural Planning and Credit Department ……………………………………….. Secretary’s Department ……………………………………………………………..

Urban Banks Department ………………………………………………………….. CHIEF VIGILANCE OFFICER …………………………………………………… COLLEGES College of Agricultural Banking, Pune …………………………………………. Reserve Bank Staff College, Chennai …………………………………………. OFFICES Chennai ………………………………………………………………………………….. Kolkata …………………………………………………………………………………….

Mumbai …………………………………………………………………………………… New Delhi ……………………………………………………………………………….. BRANCHES Ahmedabad …………………………………………………………………………….. Bangalore ……………………………………………………………………………….. Bhopal …………………………………………………………………………………….. Bhubaneswar ……………………………………………………………………………

Chandigarh ……………………………………………………………………………… Guwahati …………………………………………………………………………………. Hyderabad ………………………………………………………………….. ………….. Jaipur ……………………………………………………………………………………… Jammu ……………………………………………………………………………………. Kanpur …………………………………………………………………………………….

Lucknow ………………………………………………………………………………….. Nagpur ……………………………………………………………………………………. Patna ……………………………………………………………………………………… Thiruvananthapuram ………………………………………………………………… ………………………………………………………………………………………………. Agartala …………………………………………………………………………………..

Belapur …………………………………………………………………………………… Dehradun ………………………………………………………………………………… Gangtok ………………………………………………………………………………….. Kochi ………………………………………………………………………………………. Panaji ……………………………………………………………………………………… Raipur ……………………………………………………………………………………..

Ranchi …………………………………………………………………………………….. Shimla …………………………………………………………………………………….. Srinagar ………………………………………………………………….. ……………… CONTENTS Page No. PART ONE : THE ECONOMY – REVIEW AND PROSPECTS I. ASSESSMENT AND PROSPECTS ……………………………………………………………………… Assessment of 2010-11 ……………………………………………………………………………………..

Prospects for 2011-12 ………………………………………………………………………………………. Reserve Bank’s Perspective on the Medium-term Challenges for the Indian Economy II. ECONOMIC REVIEW ……………………………………………………………………………………….. The Real Economy …………………………………………………………………………………………… Price Situation …………………………………………………………………………………………………..

Money and Credit …………………………………………………………………………………………….. Financial Markets ……………………………………………………………………………………………… Government Finance ………………………………………………………………………………………… External Sector …………………………………………………………………………………………………. PART TWO: THE WORKING AND OPERATIONS OF THE RESERVE BANK OF INDIA III.

MONETARY POLICY OPERATIONS …………………………………………………………………… Monetary Policy Operations: Context and Rationale …………………………………………….. IV. CREDIT DELIVERY AND FINANCIAL INCLUSION ……………………………………………….. Priority Sector Lending ……………………………………………………………………………………… Financial Inclusion …………………………………………………………………………………………….

Outreach Activities ……………………………………………………………………………………………. V. DEVELOPMENT AND REGULATION OF FINANCIAL MARKETS ………………………….. Money Market ………………………………………………………………………………………………….. Government Securities Market …………………………………………………………………………… Foreign Exchange Market ………………………………………………………………………………….

Derivatives Market ……………………………………………………………………………………………. VI. REGULATION, SUPERVISION AND FINANCIAL STABILITY …………………………………. Financial Stability Assessment ……………………………………………………………………………. Monitoring of Financial Stability ………………………………………………………………………….. Assessment of the Banking Sector ………………………………………………………………………

Major Decisions Taken by Board for Financial Supervision …………………………………… Commercial Banks ……………………………………………………………………………………………. Urban Co-operatives Banks ………………………………………………………………………………. Rural Co-operatives ………………………………………………………………………………………….. Deposit Insurance and Credit Guarantee Corporation …………………………………………..

Banking Codes and Standards Board of India ……………………………………………………… Non-Banking Financial Companies …………………………………………………………………….. i 1 2 5 9 15 15 26 35 42 52 60 72 74 81 81 84 87 89 89 90 90 92 96 96 98 98 101 102 108 110 110 111 111 CONTENTS Page No. VII. PUBLIC DEBT MANAGEMENT …………………………………………………………………………. Debt Management of Central Government …………………………………………………………..

Debt Management of State Governments ……………………………………………………………. VIII. CURRENCY MANAGEMENT …………………………………………………………………………….. Banknotes in Circulation ……………………………………………………………………………………. Coins in Circulation …………………………………………………………………………………………… Currency Operations …………………………………………………………………………………………

Clean Note Policy ……………………………………………………………………………………………… Counterfeit Banknotes ………………………………………………………………………………………. Customer Service …………………………………………………………………………………………….. Indigenisation of Paper, Ink and other Raw Materials for Production of Banknotes ….. Expenditure on Security Printing and Distribution …………………………………………………

IX. PAYMENT AND SETTLEMENT SYSTEMS AND INFORMATION TECHNOLOGY ……. Oversight of Payment Systems in India ……………………………………………………………….. Policy Initiatives ………………………………………………………………………………………………… CPSS Initiatives ………………………………………………………………….. ……………………………. Information Technology ………………………………………………………………………………………

Information Technology Infrastructure …………………………………………………………………. Information Technology Applications …………………………………………………………………… Policy Initiatives ………………………………………………………………………………………………… X. GOVERNANCE, HUMAN RESOURCES DEVELOPMENT AND ORGANISATIONAL MANAGEMENT …………………………………………………………………… Initiatives for Improved Governance …………………………………………………………………….

Initiatives for Improved Communication ……………………………………………………………….. Human Resource Development Initiatives ……………………………………………………………. Initiatives in Organisation Management ………………………………………………………………. XI. THE RESERVE BANK’S ACCOUNTS FOR 2010-11 …………………………………………….. Income ……………………………………………………………………………………………………………..

Expenditure ……………………………………………………………………………………………………… Balance Sheet ………………………………………………………………………………………………….. Significant Accounting Policies and Notes to the Accounts for the Year 2010-11 ……… ii 114 114 117 122 122 122 123 123 124 126 126 126 127 127 129 131 133 133 134 136 137 137 140 142 143 150 150 151 153 160 CONTENTS Page No. Annex I : List of Speeches by Governor and Deputy Governors: April 2010 to August 2011 ……………………………………………………………

Visits of Foreign Delegations to the Reserve Bank of India during July 01, 2010 to June 30, 2011 ………………………………………… 164 166 Annex II : INDEX OF APPENDIX TABLES 1. Macroeconomic and Financial Indicators …………………………………………………………. 2. Growth Rates and Sectoral Composition of Real Gross Domestic Product ………….. 3. Gross Domestic Saving and Investment …………………………………………………………… 4. Financial Saving of the Household Sector (Gross) ……………………………………………. . Agricultural Production ………………………………………………………………………………….. 6. Procurement, Off-Take and Stocks of Foodgrains …………………………………………….. 7. Trends in Index of Industrial Production …………………………………………………………… 8. Variations in Index Numbers of Wholesale Prices ……………………………………………… 9. Variations in Reserve Money ………………………………………………………………………….. 10.

Variations in Money Stock ………………………………………………………………………………. 11. Sectoral Deployment of Gross Bank Credit ……………………………………………………… 12. Capital Market – Primary and Secondary …………………………………………………………. 13. Turnover in Indian Derivatives Market ……………………………………………………………… 14. Indices of Real Effective Exchange Rate (REER) and Nominal Effective Exchange Rate (NEER) of the Indian Rupee ………………………………………………………………….. 15. Key Fiscal Indicators ……………………………………………………………………………………… 16. Budgetary Operations of the State Governments ……………………………………………… 17. India’s Exports and Imports …………………………………………………………………………….. 18. India’s Overall Balance of Payments ……………………………………………………………….. 9. Foreign Direct Investment Flows to India: Country-wise and Industry-wise …………… 20. India’s Foreign Exchange Reserves ………………………………………………………………… 21. India’s External Debt (As at end-March) …………………………………………………………… BOXES II. 1 Would Firming Oil Prices Cringe Growth? ………………………………………………………… II. 2 Food Management – What Needs to Improve? …………………………………………………

II. 3 Transmission of Global Commodity Price Shocks to Domestic Inflation ……………….. II. 4 Growth Inflation Trade-off and Threshold Inflation …………………………………………….. II. 5 Towards Better Price Statistics ………………………………………………………………………… iii 168 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 17 21 30 32 34 CONTENTS Page No. II. 6 Determinants of Currency Demand – What Caused the Shift in Trend? ……………… II. Short-run Shocks to Money Velocity and the Behaviour of Money Growth …………… II. 8 Financial Derivatives in India – Current Status ………………………………………………….. II. 9 Trends in Non-Bank Financing- Is the Financial System still Bank Dominant? ……… II. 10 Impact of Financial Market Developments on Financial Soundness Indicators of the Banking System ………………………………………………………………………………………. II. 11 Infrastructure Financing ………………………………………………………………………………….

II. 12 Revenue and Expenditure Reforms – Improving the Fiscal Environment for Robust and Inclusive Growth ………………………………………………………………………….. II. 13 Fiscal Indicators in a Rule-based Framework: Cross-country Survey ………………….. II. 14 Fiscal Multiplier: A Cross-Country Experience …………………………………………………… II. 15 Recommendations of Committee on the Comprehensive Review of the NSSF …….. II. 16 Has Increasing Globalisation Limited the Effectiveness of National Policies in India? II. 7 India’s Threshold level of Sustainable Current Account Deficit …………………………… II. 18 Interest Rate Sensitivity of Capital Flows to India ……………………………………………… II. 19 Equilibrium Exchange Rate …………………………………………………………………………….. III. 1 Monetary Policy Transmission after the Switchover to Base Rate ………………………. III. 2 Changes in Operating Procedure of Monetary Policy ……………………………………….. IV. 1 Financial Inclusion and Inclusive Growth: What the Empirical Evidence Suggests? IV. 2 Committee on the MFI Sector (Malegam Committee) ………………………………………… V. 1 Guidelines on Credit Default Swaps (CDS) for Corporate Bonds ……………………….. V. 2 NDF Market and its Implication for the Domestic Financial Markets …………………….. VI. 1 Financial Stability Board (FSB) ……………………………………………………………………….. VI. 2 Developments related to FSDC and its Sub-Committee …………………………………….. VI. 3 Corporate and Household Leverage, Credit Cycle and Economic Growth ……………

VI. 4 Initiatives taken by the Reserve Bank to migrate towards the Basel III norms ………. VI. 5 Expert Committee on Licensing of New Urban Cooperative Banks ……………………… VI. 6 Regulatory Framework for Core Investment Companies (CICs) ………………………….. VII. 1 Developments in RBI’s role as Banker to Government ………………………………………. VIII. 1 Procedure for Dealing with Counterfeit Currency ……………………………………………… IX. 1 Interdependencies in Payment Systems …………………………………………………………..

IX. 2 IT Vision Document: 2011-2017 ……………………………………………………………………… IX. 3 Information Technology as a Vehicle for Data Dissemination ……………………………… X. 1 Governance Framework in the Reserve Bank ………………………………………………….. X. 2 Knowledge Initiative ………………………………………………………………………………………. iv 38 39 48 50 51 51 55 57 59 60 63 67 69 70 73 77 84 88 94 95 97 98 99 104 109 112 118 125 132 134 135 138 144 CONTENTS Page No.

CHARTS II. 1 Real GDP Growth …………………………………………………………………………………………. II. 2 Saving and Investment (Per cent of GDP at current market prices) ……………………. II. 3 Household Financial Savings …………………………………………………………………………. II. 4 Comparative Yield: India and the World …………………………………………………………… II. 5 2010-11 Yield Differential – State-wise …………………………………………………………….. II. Monsoon and Agriculture ……………………………………………………………………………….. II. 7 Growth in IIP (Y-o-Y) ……………………………………………………………………………………… II. 8 Industrial Growth …………………………………………………………………………………………… II. 9 Components of Aggregate Demand and Related Industry Growth Trends …………… II. 10 Growth in Infrastructure Industries …………………………………………………………………..

II. 11 Growth in Services Sector GDP ………………………………………………………………………. II. 12 Growth Trend in Cargo Movements …………………………………………………………………. II. 13 Growth in services (excluding community, social and personal services) …………….. II. 14 Expenditure Side of GDP ……………………………………………………………………………….. II. 15 Changing Weighted Contributions to Increase in WPI ……………………………………….. II. 6 Trends in Wholesale Price Inflation …………………………………………………………………. II. 17 Contribution to Inflation: Major Groups ……………………………………………………………. II. 18 Trends in Food Inflation …………………………………………………………………………………. II. 19 Global and Domestic Fuel Inflation (Y-o-Y) ………………………………………………………. II. 20 Manufactured Products Inflation ………………………………………………………………………

II. 21 International Commodity Prices ………………………………………………………………………. II. 22 CPI and WPI Inflation (Y-o-Y) ………………………………………………………………………….. II. 23 Trends in GDP Growth and Inflation ………………………………………………………………… II. 24 Growth in Reserve Money ……………………………………………………………………………… II. 25 Important Sources of Variation in Reserve Money ……………………………………………..

II. 26 Liquidity Management Operations …………………………………………………………………… II. 27 Money and Deposit Growth ……………………………………………………………………………. II. 28 Variations in M3 in ` crore and per cent share of Major Components of M3 in the Variation ………………………………………………………………………………………………………. II. 29 Non-food Credit Growth (Y-o-Y, per cent) ………………………………………………………… II. 0 Share of Various Sub-sectors in Incremental Industrial Credit Flow …………………….. II. 31 Aggregate Deposits and Bank Credit of SCBs …………………………………………………. II. 32 Flow of Financial Resources to the Commercial Sector …………………………………….. II. 33 Indicators of Global Financial Market Developments …………………………………………. II. 34 Transmission of Policy Rates to Financial Markets ……………………………………………. II. 35 Movement in Government Securities Yield Curve ……………………………………………… 16 16 18 19 19 20 22 22 23 23 24 24 24 25 26 27 27 28 28 29 29 31 31 35 36 36 37 37 37 40 41 41 42 43 44 CONTENTS Page No. II. 36 Activities in Domestic Financial Markets …………………………………………………………… II. 37 Volatility in the Indian Financial Markets …………………………………………………………… II. 38 Movement in Equity Markets …………………………………………………………………………… II. 39 Activity in Financial Derivatives Market …………………………………………………………….

II. 40 Movement in Housing Prices and Transactions ………………………………………………… II. 41 Exchange Rate and Forward Premia ………………………………………………………………. II. 42 Key Deficit Indicators …………………………………………………………………………………….. II. 43 Subsidies of Central Government …………………………………………………………………… II. 44 Key Global Indicators ……………………………………………………………………………………..

II. 45 India’s External Trade ……………………………………………………………………………………. II. 46 Year-on-Year Export Growth of India vis-a-vis AEs and EMEs …………………………….. II. 47 Exports and Imports of Major Commodities ………………………………………………………. II. 48 Performance of India’s Invisibles …………………………………………………………………….. II. 49 Trends in the Major Components of Balance of Payments …………………………………. II. 0 Trends in Major Components of Capital Flows (Net) …………………………………………. II. 51 Country-wise FDI Inflows ………………………………………………………………………………… II. 52 Industry-wise FDI Flows …………………………………………………………………………………. II. 53 Exchange Rate flexibility in India …………………………………………………………………….. II. 54 Movements of Indian Rupee against US Dollar and Euro …………………………………… II. 5 External Debt Indicators …………………………………………………………………………………. III. 1 Repo (+)/Reverse Repo (-) under LAF ……………………………………………………………. III. 2 Outstandings under LAF and GoI Balance ………………………………………………………. VI. 1 Soundness Indicators on SCBs ………………………………………………………………………. VII. 1 Cash Balance of the Central Government ……………………………………………………….. VIII. Cost of Security Printing ………………………………………………………………………………… IX. 1 Share of Paper Based Vs Electronic Transaction ……………………………………………… X. 1 Total Staff Strength of the Reserve Bank …………………………………………………………. TEXT TABLES III. 1 Movements in Key Policy Rates and Reserve Requirements in India ………………….. III. 2 Monetary Policy Reviews ……………………………………………………………………………….. III. Liquidity Management Measures taken by the Reserve Bank in 2010-11 ……………. IV. 1 Priority Sector Advances ………………………………………………………………………………… IV. 2 Disbursements under SACP by Public Sector Banks ………………………………………… IV. 3 Recovery of Direct Agricultural Advances ………………………………………………………… IV. 4 Compensation of lending institutions under Agricultural Debt Waiver and Debt Relief Scheme, 2008 ………………………………………………………………………………………

IV. 5 Credit to MSE Sector by SCBs ……………………………………………………………………….. vi 46 47 47 49 49 50 53 54 61 64 64 65 66 66 68 68 68 68 70 71 78 78 100 117 126 130 146 75 75 79 81 82 82 82 83 CONTENTS Page No. VI. 1 Select Financial Indicators ……………………………………………………………………………… VII. 1 Gross and Net Market Borrowings of the Central Government …………………………… VII. 2 Central Government’s Market Loans – A Profile …………………………………………………

VII. 3 Issuance of GoI Dated Securities – Maturity Pattern ………………………………………….. VII. 4 States’ Market Borrowings ………………………………………………………………………………. VII. 5 Residual Maturity Profile of Outstanding State Development Loans and Power Bonds (as at end-March 2011) ……………………………………………………………………….. VII. 6 Yield on State Government Securities ……………………………………………………………… VII. WMA/OD of State Governments (Average monthly outstanding) ………………………… VII. 8 No. of Days States Availed of Special/Normal WMA and OD ……………………………….. VII. 9 Investments of the State Governments/UT ……………………………………………………….. VIII. 1 Banknotes in Circulation ………………………………………………………………………………… VIII. 2 Coins in Circulation ……………………………………………………………………………………….. VIII. Currency Chests and Small Coin Depots …………………………………………………………. VIII. 4 Indent and Supply of Banknotes (April –March) ……………………………………………….. VIII. 5 Indent and Supply of Coins ……………………………………………………………………………. VIII. 6 Disposal of Soiled Notes and Supply of Fresh Banknotes …………………………………. VIII. 7 Counterfeit Notes Detected ……………………………………………………………………………. IX. Payment System Indicators – Annual Turnover …………………………………………………. X. 1 Reserve Bank Training Establishments – Programmes Conducted ……………………… X. 2 Number of Officers Trained in External Training Institutions in India and Abroad ….. X. 3 Recruitment by the Reserve Bank – 2010 ……………………………………………………….. X. 4 Staff Strength of the Reserve Bank …………………………………………………………………. X. 5 Category-wise Staff Strength …………………………………………………………………………..

X. 6 Reserve Bank’s Office-wise Strength of Staff ……………………………………………………. XI. 1 Gross Income ……………………………………………………………………………………………….. XI. 2 Earnings from Foreign Sources ………………………………………………………………………. XI. 3 Earnings from Domestic Sources ……………………………………………………………………. XI. 4 Expenditure …………………………………………………………………………………………………..

XI. 5 Trends in Gross Income, Expenditure and Net Disposable Income ……………………… XI. 6 Contingency and Asset Development Reserves and Surplus Transfer to the Government …………………………………………………………………………………………………. XI. 7 Balances in Currency and Gold Revaluation Account (CGRA), Exchange Equalisation Account (EEA) and Investment Revaluation Account (IRA) ……………… XI. 8 Balances in Contingency Reserve and Asset Development Reserve ………………….. XI. Outstanding Foreign Currency and Domestic Assets ………………………………………… XI. 10 Foreign Exchange Reserves ………………………………………………………………………….. XI. 11 Investments in Shares of Subsidiaries/Associate Institutions ……………………………… vii 101 114 115 115 117 117 119 119 120 120 122 123 123 123 124 124 125 128 142 143 146 147 147 148 151 151 152 152 153 153 155 156 156 157 157 LIST OF ABBREVIATIONS AACS AD ADB A. E. AEs ALM AMA AML ASEAN Advanced Access Content System Authorised Dealer Asian Development Bank Advance Estimates Advanced

Economies Assets Liability Management Advance Measurement Approach Anti Money Laundering Association of Southeast Asian Nations CCP ASSOCHAM ATBs ATM BC BCBS BCP BCSBI BE BFS BI BIFR BIS BO BPL BPLR bps BPSS BRBNMPL BSE BWA CAB CACP CAD CAFL Associated Chambers of Commerce and Industry of India Auction Treasury Bills Automated Teller Machine CDR Business Correspondent CDs Basel Committee on Banking Supervision Business Continuity Planning Banking Codes and Standards Board of India Budget Estimates Board for Financial Supervision Business Intelligence Board for Industrial and Financial Reconstruction Bank for International Settlements Banking Ombudsman Below Poverty Line Benchmark Prime Lending Rate Basis Points Board of Payment and Settlement System Bharatiya Reserve Bank Note Mudran Private Limited Bombay Stock Exchange Broadband Wireless Access Current Account Balance Commission for Agricultural Costs and Prices Current Account Deficit Centre for Advanced Financial Learning CPSUs CRA CRAR CRCS CRM CPIO CPIOs CPSS CPI CPI-IW CDS CGA CIC CII CIP CMBs CODs CoR CP CPADS Credit Default Swap Controller General of Accounts Core Investment Company Confederation of Indian Industry Central Issue Price Cash Management Bills Central Office Department Certificate of Registration Commercial Paper Centralised Public Account Department Systems Consumer Price Index Consumer Price Index for Industrial Workers Chief Public Information Officer Central Public Information Officers Committee on Payment and Settlement Systems Central Public Sector Undertakings Credit Rating Agencies Capital to Risk-weighted Assets Ratio Central Registrar of Co-operative Societies Customer Relationship Management Certificates of Deposit Corporate Debt Restructuring CCs CDBS Central Counter Parties Currency Chests Currency Disintegration and Briquetting System CAS CBLO CBRC CBS CCBs CCIL CAFRAL Centre for Advanced Financial Research and Learning Central Account Section Collateralized Borrowing and Lending Obligation China Banking Regulatory Commission Core Banking Solutions Central Cooperative Banks Clearing Corporation of India Ltd. viii LIST OF ABBREVIATIONS CRR CSF CSO CTS CVPS DCCBs DEPR DGA DGCI DICGC DIF DIT DR DRM DSIM DSS

DTC DTL DWM EBT ECB ECCS ECS EKP EMDEs EMEs EMS ERER ETL FAO FC FCI Cash Reserve Ratio Consolidated Sinking Fund Central Statistics Office Cheque Truncation System Currency Verification and Processing System District Central Co-operative Banks Department of Economic and Policy Research Duration Gap Analysis FITF Directorate General of Commercial Intelligence and Statistics Deposit Insurance and Credit Guarantee Corporation Deposit Insurance Fund Department of Information Technology Disaster Recovery Dispute Resolution Mechanism Department of Statistics and Information Management Decision Support Systems Direct Tax Code Demand and Time Liabilities Dynamic Working Model Electronic Benefit Transfer External Commercial Borrowings Express Cheque Clearing System Electronic Clearing Services Enterprise knowledge Portal Emerging Market and Developing Economies Emerging Market Economies Estate Management System Equilibrium Real Exchange Rate Extract Transform and Load Food and Agriculture Organization Finance Commission Food Corporation of India GFCF GFD GoI FLCCs FMC FMD FMI FPS FRAs FRBM FRBs FRLs FSB FSDC FSF FST GCC GCF GDP GDS GFCE FII FIIs FIMMDA Financial Inclusion Technology Fund Financial Inclusion Index Foreign Institutional Investors Fixed Income Money Market and Derivatives Association of India Financial Literacy and Credit Counseling Centres Forwards Markets Commission Financial Market Department Financial Market Infrastructures Fair Price Shops Forward Rate Agreements Fiscal Responsibility and Budget Management Floating Rate Bonds Fiscal Responsibility Legislations Financial Stability Board Fiscal Stability and Development Council Financial Stability Forum Financial Sector Technology General Purpose Credit Cards Gross Capital Formation Gross Domestic Product Gross Domestic Savings Government Final Consumption Expenditure Gross Fixed Capital Formation Gross Fiscal Deficit Government of India FCNR(B) FDI FEMA FI FICCI FIF FCMD Financial Conglomerates Monitoring Division Foreign Currency Non-Resident Accounts (Banks) Foreign Direct Investment Foreign Exchange Management Act Financial Institutions Federation of Indian Chambers of Commerce & Industry Financial Inclusion Fund ix LIST OF ABBREVIATIONS

GPS GRF G-sec GST HLCCFM HTM IADI IAS IBA ICCL ICOR ICT IDRBT IES IFCs IFRS IFTP IGIDR IIBM IIFCL IIM IIP IIT IMD IMF INFINET IOSCO IPCs IRDA IRF IRS Global Positioning System Guarantee Redemption Fund Government Securities Goods and Services Tax High Level Coordination Committee on Financial Markets Held to Maturity International Association of Deposit Insurance Integrated Accounting System Indian Banks Association Indian Clearing Corporation Limited Incremental Capital Output Ratio Information and Communication Technology Institute for Development and Research in Banking Technology Integrated Establishment System Infrastructure Finance Companies International Financial Reporting Standards Inter-bank Funds Transfer Processor Indira Gandhi Institute of Development Research Indian Institute of Bank Management India Infrastructure Finance Company Ltd.

Indian Institute of Management Index of Industrial Production Indian Institute of Technology India Meteorological Department International Monetary Fund Indian Financial Network International Organisation of Securities Commissions Irrevocable Payment Commitments Insurance Regulatory and Development Authority Interest Rate Futures Interest Rate Swaps IT ITBs ITeS JLG JV/WOS KCCs KVP KYC LABs LAF LAN LC LCR LTV M3 MCX MCX-SX MENA MFIs MFs MIBOR MICR MIS MMS MoF MoU MPLS MQRs MSE MSF MSME MSP MSS MURI ISMS ISO Information Security Management System International Organisation for Standardisation Information Technology Intermediate Treasury Bills Information Technology enable Services Joint Liability Group Joint Ventures/ Wholly Owned Subsidiaries Kisan Credit Cards Kisan Vikas Patra Know Your Customer Local Area Banks Liquidity Adjustment Facility Local Area Network Letter of Credit Liquidity Coverage Ratio Loan to Value Ratio Broad Money Multi Commodity Exchange MCX Stock Exchange Middle East and North Africa Micro-Finance Institutions Mutual Funds Mumbai Inter-bank Offered Rate Magnetic Ink Character Recognition Management Information System Mail Messaging Solution Ministry of Finance Memorandum of Understanding Multi Protocol Label Switching Mid Quarter Reviews Micro and Small Enterprises Marginal Standing Facility Micro, Small and Medium Enterprises Minimum Support Prices Market Stabilisation Scheme Minimum Unemployment Rate of Inflation x LIST OF ABBREVIATIONS

NAB NABARD NAIRU NASSCOM NBFCs NBS NCAF NCD NDF NDTL NECS NEFT NEL NFA NFSB NHB NIBM NIM NOC NOF NPAs NPS NR(E)RA NREGA NRIs NSC NSCCL NSE NSFR NSM NSSF NSSO OBCs New Agreements to Borrow National Bank for Agriculture and Rural Development Non-Accelerating Inflation Rate of Unemployment National Association of Software and Services Company Non-Banking Financial Companies Nutrient Based Subsidy Net Capital Adequacy Framework Non-Convertible Debenture Non-Deliverable Forwards Net Demand and Time Liabilities National Electronic Clearing Services PDS National Electronic Fund Transfer Net External Liabilities Net Foreign Currency Assets National Food Security Bill National Housing Bank National Institute of Bank Management Net Interest Margin No Objection Certificate Net Owned Fund Non-Performing Assets New Pension Scheme Non-Resident (External) Rupee Account National Rural Employment Guarantee Act Non Resident Indians National Savings Certificate National Security Clearing Co-operation Limited National Stock Exchange Net Stable Funding Ratio Note Sorting Machines National Small Savings Fund National Sample Survey Office Other Backward Classes RCS RD RE RECS REER RIA RIDF RNBCs ROs PI PIOs PNs POS PPP PSS Q. E.

QIS RBI RBSC RCCP PFCE PGPBF Public Distribution System Private Final Consumption Expenditure Post Graduate Programme in Banking and Finance Participant Interface Persons of Indian Origin Participatory Notes Points of Sale Public-Private Partnership Payment and Settlement System Quick Estimates Quantitative Impact Study Reserve Bank of India Reserve Bank Staff College Recommendations for Central Counterparties Registrar of Co-operative Societies Revenue Deficit Revised Estimates Regional Electronic Clearing Service Real Effective Exchange Rate Right to Information Act Rural Infrastructure Development Fund Residuary Non-Banking Companies Regional Offices OD OIS OLS OMO ORFS OTC OTS PACS PAD PAR PCR PDO-NDS Over Draft Overnight Index Swap Ordinary Least Square Open Market Operation Online Return Filing System Over-the-Counter One Time Settlement Primary Agricultural Credit Societies Public Account Department Performance Appraisal Reports Provisional Coverage Ratio Public Debt Office- Negotiated Dealing System xi LIST OF ABBREVIATIONS

RoA RoE RR RRBs RSSS RTGS RTI SACP SCBs SCEPR SCs SCSS SDL SEBI SEZ SGL SHG SIDBI SIFI SLAF SLBC SLR SMEs SPMCIL SPVs Return on Assets Return on Equity Revenue Rules Regional Rural Banks Recommendations for Securities Settlement Systems Real Time Gross Settlement Right to Information Special Agricultural Credit Plan Scheduled Commercial Banks Steering Committee on Economic and Policy Research Scheduled Castes Senior Citizens’ Saving Scheme State Development Loan Securities and Exchange Board of India Special Economic Zone Subsidiary General Loan Self-Help Group Small Industries Development Bank of India Systemically Important Financial Institutions Second Liquidity Adjustment Facility State Level Bankers Committees Statutory Liquidity Ratio Small and Medium Enterprises Security Printing and Minting Corporation of India Special Purpose Vehicles STC StCBs STCRC STOs STs TAC TAFCUBs TAG T-Bills TGA UCBs USE UTs VAR VAT VECM VGF VVVF WMA WPI XBRL XML Y-o-Y ZCBs ZCYC ZTCS ST CCS Short-term Rural Cooperative Credit Societies Short-term Trade Credit State Co-operative Banks Short-term Co-operative Rural Credit Sub Treasury Officers Scheduled Tribes Technical Advisory Committee Task Force for Cooperative Urban Banks Technical Advisory Group Treasury Bills Traditional Gap Analysis Urban Cooperative Banks United Stock Exchange Union Territories Vector Auto Regression Value Added Tax Vector Error Correction Mechanism Viability Gap Funding Variable Voltage Variable Frequency Ways and Means Advances Wholesale Price Index Extensible Business Reporting Language Extensive Mark Up Year on Year Zero Coupons Bonds Zero Coupon Yield Curve Zonal Training Centres This Report can also be accessed on Internet URL : www. rbi. org. in xii THE ANNUAL REPORT ON THE WORKING OF THE RESERVE BANK OF INDIA For the Year July 1, 2010 to June 30, 2011* PART ONE: THE ECONOMY – REVIEW AND PROSPECTS I ASSESSMENT AND PROSPECTS The Indian economy returned to a high growth path in 2010-11. However, challenges emerged as the year progressed.

First, investment activity slowed in the second half of the year as business confidence was impacted by high commodity prices, tight monetary policy, political factors and execution issues. Second, while headline fiscal numbers improved during the year, the improvement was led by cyclical and one-off factors, leaving its sustainability in question. Third, though monetary policy was tightened through the year, inflation remained sticky on the back of new pressures. It also turned broad-based in the later part of the year with cost-push and demand-pull factors feeding into producer prices. This prompted the Reserve Bank to take aggressive policy actions during May-July 2011. Going ahead, global uncertainty, sticky inflation, hardening interest rates and high base, especially for agriculture, could moderate growth in 2011-12.

On the other hand, though global commodity prices appear to have plateaued, inflation is likely to be elevated in near term and fall only towards the later part of the year as monetary transmission works through further. For medium-term growth sustainability, it is important to rebalance demand from private and government consumption to private and public investment, while inflation is lowered on an enduring basis through better supply responses. Continued focus on development of infrastructure and agriculture technology through public policy would facilitate improved supply response. I. 1 The Indian economy rebounded strongly in 2010-11 from the moderation induced by global financial crisis. However, several macroeconomic factors posed new challenges in 2010-11.

During the preceding year and a half, the Reserve Bank had to carefully calibrate its monetary policy as the global financial crisis and the consequent slowdown in the global growth adversely impacted India’s real and financial economic conditions. Both, fiscal and monetary policies worked in tandem to pull the Indian economy quickly and firmly out of the slowdown. I. 2 Even as growth reverted to its trend, new challenges emerged. First, the headline inflation accelerated from the negative levels in mid-2009 to double digits during March-July of 2010. The whole of 2010-11 was marked by inflation persistence, with headline inflation averaging 9. 6 per cent. The Reserve Bank responded to the inflation challenge by raising repo rate seven times during the year by 25 basis points (bps) each.

Despite these actions, inflation remained elevated due to both newer supply-side shocks and demand factors. As input costs rose and were passed on substantially amidst strong consumption demand, inflation became generalised since December 2010. I. 3 In response to the generalisation, the Reserve Bank raised its policy rate – the repo rate – more aggressively in 2011-12. It hiked the rate by 50 bps in * While the Reserve Bank of India’s accounting year is July-June, data on a number of variables are available on a financial year basis, i. e. , April-March, and hence, the data are analysed on the basis of the financial year. Where available, the data have been updated beyond March 2011 based on information available till mid-August.

For the purpose of analysis and for providing proper perspective on policies, reference to past years as also prospective periods, wherever necessary, has been made in this Report. 1 ANNUAL REPORT May, 25 bps in June and again by 50 bps in July. With this, operational policy rate has been raised by 475 bps in less than 17 months since March 2010, when the rate hikes began. Monetary transmission improved considerably in the latter half of 2010-11 after sustained tight liquidity prompted banks to raise deposit and lending rates. It continued into 2011-12, helping avert inflation gathering further momentum amidst high inflation expectations and persistence of pricing power of the producers, reflecting strong demand. I. Second, even as overall GDP growth increased supported by strong private consumption demand, investment slowed down during the second half of 2010-11 and has shown no signs of improvement yet. Considering that investment intentions in the new projects declined significantly in the second half of 2010-11 on a sequential basis, maintaining corporate investment levels in 2011-12 could turn out to be difficult. Corporate fixed investment, as captured by phasing details of the projects sanctioned financial assistance, which showed a seven fold jump during 2003-04 to 200910, also turned flat in 2010-11, with a sharp dip in the second half. Public investment in relation to the size of the economy declined during 2008-09 and 200910.

With revenue deficit, despite some improvement during 2010-11 remaining above the levels that prevailed during 2004-05 to 2007-08, fiscal space to support investment in the economy remains limited. This underscores the importance of focusing on quality of fiscal consolidation. Meanwhile, in an uncertain interest rate environment, it remains to be seen how far the momentum in investment can be sustained ahead. As such, in the short run, investment cycle can be elongated by focusing on better execution of pipeline investment and improved governance at all levels, internal and external to a firm. Why did inflation persist and was this predictable? I. The year 2010-11 was marked by strong inflation exhibiting persistence on the back of elevated inflation expectations, spike in vegetable prices with unseasonal rains post-monsoon and rising global commodity prices that resulted in significant cost-push and demand-pull pressures since December 2010. Drivers of inflation changed during 2010-11. Food products were the main drivers of price rise during April-July 2010, accounting for about two-fifths of increase in WPI. Their share declined during AugustNovember, when non-food primary products turned out to be the main drivers. However, these price pressures spilled over to manufactured non-food products during December 2010-March 2011, which accounted for 61 per cent of the price rise in this period. I. 7 Inflation became difficult to predict in face of this changing pattern, where new unforeseen price pressures emerged.

The declining trend in inflation during first half of 2010-11 was disrupted by sharper-than-expected rise in global commodity prices and structural factors constraining the decline in food prices in spite of normal monsoon. An unforeseen spike in vegetable prices due to unseasonal rains followed the good monsoon. Finally, as inflation spilled over to the manufactured non-food products, producers were able to pass on a large share of the input cost pressures reflecting strong demand. Was monetary tightening adequate and did it help fight inflation? I. 8 Cumulative monetary tightening by raising operational policy rates by 475 bps since mid-March 2010 has been one of the sharpest around the world. Of this, hikes of 325 bps occurred during 2010-11.

The hikes were in smaller but frequent doses as the frequency of scheduled policy decisions was increased to eight from four, enabling a smoother adjustment of the financial markets to monetary policy actions. The magnitude of these rate hikes was small 2 ASSESSMENT OF 2010-11 I. 5 In assessing the macroeconomic performance of 2010-11, some questions are central to the overall assessment as set out below. ASSESSMENT AND PROSPECTS as the nature of inflation was largely supply-driven for the larger part of the year. Also, liquidity conditions were already unusually tight following the unexpectedly large 3G/BWA spectrum auction revenues that resulted in large government cash balances with the Reserve Bank for a major part of 2010-11. I. 9 Policy choices toughened during the second half of the year.

Inflation had become generalised towards the later part of the year, even as the headline IIP growth numbers available then on the basis of old index (base: 1993-94) suggested a distinct deceleration. The Reserve Bank assessed that this deceleration was exacerbated by few volatile components. The deceleration was much less if these volatile components were excluded from the growth. Furthermore, related indicators such as credit expansion, corporate profitability, exports and imports, trend in tax collections did not corroborate the slowdown. Monetary policy was tightened further in face of persistence of high inflation. However, the hikes remained small in quantum as headline and core inflation were expected to trend down.

Also, uncertain inferences on growth due to data quality prompted a cautious view. The new IIP numbers (base: 2004-05) released subsequently reinforced the RBI view that growth had not decelerated during the second half of 2010-11. I. 10 In face of a series of supply-side shocks, monetary tightening helped to keep some check on the spillover effects and high inflation expectations. However, monetary policy was constrained by the extraordinarily large stimulus given in the wake of global financial crisis. Large surplus liquidity needed to be siphoned out first, before rate hikes could begin to gain traction. Both, the rate and quantum channels of monetary transmission were weak in the first half.

Banks started responding to monetary signals in the second half of the year by raising deposit and lending rates, helping restrain inflationary pressures from spiraling up further. 3 Did the growth rebound of 2010-11 lose steam in the second half? I. 11 It is now clear that the growth did not lose momentum in the second half of 2010-11. IIP growth accelerated to 8. 2 per cent in 2010-11 from 5. 3 per cent in the previous year. It grew at about the same pace in the second half as in the first half. I. 12 Agricultural growth rebounded in the second half due to record Kharif crop on back of normal monsoon. The consequent rise in farm incomes supported demand conditions and with linkages with industry and services, kept the overall growth momentum.

Services remained buoyant, except ‘ community, social and personal services’ where policy-induced deceleration was visible as fiscal consolidation resumed. I. 13 Overall growth in 2010-11 is currently estimated at 8. 5 per cent and is likely to turn higher after factoring in the new base IIP in the GDP data revisions. The above trend growth in 2010-11 was supported by strong aggregate demand conditions primarily emerging from high private consumption. As a result, the supply-side price pressures spilled over to generalised inflation. Was the fiscal consolidation in 2010-11 temporary or permanent? I. 14 Fiscal deficit ratios in 2010-11 turned out to be better than envisaged in the Union budget.

Centre’s gross fiscal deficit (GFD) was 4. 7 per cent of GDP against 5. 5 per cent budgeted. Compared with a GFD of 6. 4 per cent of GDP in 2009-10, this was a huge swing. I. 15 A qualitative assessment of fiscal correction during 2010-11, however, raises concerns. Not only did the correction in revenue account reflect morethan-anticipated non-tax revenues from spectrum auctions, there has been a spillover of subsidy expenditure from the last quarter of 2010-11 to the current fiscal year. Although the share of capital ANNUAL REPORT expenditure in total expenditure increased in 201011 from 2009-10, it was marginally lower than the budget estimates.

In particular, capital outlay-GDP ratio fell short of the budgeted ratio in 2010-11 and is still significantly lower than that achieved during precrisis period. Consequently, in outstanding terms, the Central government’s capital outlay (as ratio to GDP) as at end-March 2011 was lower at 12. 9 per cent than 13. 8 per cent a year ago. I. 16 Improved fiscal position had a large temporary component arising from a business cycle upswing and one-off revenue gains. This resulted in the improvement in headline deficit numbers. Not counting for the revenue proceeds of two main one-off items – spectrum auction and the disinvestment – the GFD/GDP ratio works out to be 6. 3 per cent of GDP during 2010-11.

Also, revenue buoyancy was supported by a cyclical upswing that led to above trend growth. So the one-off gains and higher growth in nominal GDP of 20 per cent against the budgeted 12. 5 per cent contributed largely to lower deficits, while the permanent component of fiscal consolidation was rather weak. I. 17 Clearly, a more enduring fiscal consolidation strategy that focuses on expenditure compression by restraining subsidies as well as revenue enhancement by implementing Direct Taxes Code (DTC) and Goods and Services Tax (GST) needs to be put into place without any further delay. Why did the CAD improve and is this improvement sustainable? I. 8 The improvement in the current account gap is more sustainable than the fiscal gap. The improvement came about by cyclical upswing in global trade and turnaround in invisibles. The Current Account Deficit (CAD) improved markedly in the second half of 2010-11 on back of a strong pick-up in exports from November 2010. Diversification of trade in terms of composition as well as direction helped in achieving strong export performance. Trade policy supporting exports through schemes such as Focus 4 Market Scheme (FMS), Focus Product Scheme (FPS) and Duty Entitlement Passbook Scheme (DEPB) also helped. I. 19 The CAD improved to 2. 6 per cent in 2010-11 from 2. 8 per cent in 2009-10.

Going forward, there could be some pressure on CAD if the global economy weakens significantly and affects exports. With adequate foreign exchange reserves, India remains capable of handling any pressures emanating from the external sector in the near term. However, from a medium to long term perspective, it is important to improve resilience of external account by pursuing policies that shift the composition of capital flows so as to reduce dependence on its volatile components. Augmenting FDI further could bring about a better balance between different components of capital flows and reduce the possibility of volatile currency movements and any pressure on reserves in the face of contagion risks. Have financial markets mitigated risks postcrisis? I. 0 Financial markets across the world have witnessed significant deleveraging in the post-crisis period. However, balance sheet risks still remain. Effective market discipline is not getting reestablished. Assurances that multilateral backstops have the capacity to facilitate an orderly deleveraging without triggering further fiscal or bank funding lack credibility. Against this backdrop, it is important to look at whether financial risks have been sufficiently mitigated in India, should another round of contagion occur. I. 21 A strong payment and settlement system architecture with central counterparties and Delivery versus Payment (DvP) is in place in India.

While in the post-Lehman crisis, NBFCs and Mutual Funds came under some stress, banks proved to be largely resilient. Since then regulators have taken several measures to strengthen regulation and supervision, increase transparency and reduce settlement risks for derivatives and other financial instruments. ASSESSMENT AND PROSPECTS Despite these measures there still remain areas of concern. I. 22 The OTC interest rate derivative market in India display a significant degree of concentration, with domination by a few banks. The growth of derivatives as off-balance sheet items of Indian banks is also a source of risk. The absence of a liquid 3month or 6-month funds market has led to the absence of a term benchmark curve.

This is hindering trading in Forward Rate Agreements (FRAs) as also in swaps. However, recent emergence of a deep and liquid Certificates of Deposit (CDs) market with significant secondary market trading could alleviate this issue. I. 23 India continues to promote orderly development of the financial markets. In particular, efforts have been made to develop a vibrant interest rate futures (IRF) market to support long-term debt financing in India. In March 2011, the Reserve Bank permitted IRF trading in 91-day Treasury bills with cash settlement in rupees. Guidelines for 5-year and 2-year IRFs are being finalised in consultation with the Securities and Exchange Board of India (SEBI).

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