Report of the Central Board of Directors on the working of the Reserve Bank of India

for the year ended June 30, 2008 submitted to the Central Government in terms of

Section 53(2) of the Reserve Bank of India Act, 1934

RESERVE BANK OF INDIA ANNUAL REPORT2007-2008

CENTRAL BOARD / LOCAL BOARDS

GOVERNOR

Y.V. Reddy

DEPUTY GOVERNORS

Rakesh Mohan

V. Leeladhar

Shyamala Gopinath

Usha Thorat

DIRECTORS NOMINATED UNDER

SECTION 8 (1) (b) OF THE RBI ACT, 1934

Y.H. Malegam

Suresh D. Tendulkar

U.R. Rao

Lakshmi Chand

DIRECTORS NOMINATED UNDER

SECTION 8 (1) (c) OF THE RBI ACT, 1934

H. P. Ranina

Ashok S. Ganguly

Azim Premji

Kumar Mangalam Birla

Shashi Rajagopalan

Suresh Neotia

A. Vaidyanathan

Man Mohan Sharma

D. Jayavarthanavelu

Sanjay Labroo

DIRECTOR NOMINATED UNDER

SECTION 8 (1) (d) OF THE RBI ACT, 1934

D. Subbarao

MEMBERS OF LOCAL BOARDS

WESTERN AREA

Y.H. Malegam

K. Venkatesan

Dattaraj V. Salgaocar

Jayanti Lal Bavjibhai Patel

EASTERN AREA

Suresh D. Tendulkar

A. K. Saikia

Sovan Kanungo

NORTHERN AREA

U.R. Rao

Mitha Lal Mehta

Ram Nath

Pritam Singh

SOUTHERN AREA

Lakshmi Chand

C. P. Nair

M. Govinda Rao

Devaki Jain

As on June 30, 2008

PRINCIPAL OFFICERS

(As on June 30, 2008)

EXECUTIVE DIRECTORS ...................................................... R.B. Barman...................................................... V.K. Sharma...................................................... C. Krishnan...................................................... Anand Sinha...................................................... V.S. Das...................................................... G. Gopalakrishna...................................................... H.R. Khan

CENTRAL OFFICEDepartment of Administration and Personnel Management ....... Prabal Sen, Principal Chief General ManagerCustomer Service Department ..................................................... Kaza Sudhakar, Chief General ManagerDepartment of Banking Operations and Development ................ P. Saran, Chief General Manager-in-ChargeDepartment of Banking Supervision ............................................ S. Karuppasamy, Chief General Manager-in-ChargeDepartment of Communication .................................................... Kum. A.I. Killawala, Press Relations Officer (Gr. F)Department of Currency Management ........................................ U.S. Paliwal, Chief General ManagerDepartment of Economic Analysis and Policy ............................. G.S. Bhati, Principal Adviser (Officiating)Department of Expenditure and Budgetary Control .................... Smt. Deepa Srivastava, Chief General ManagerDepartment of External Investments and Operations ................. Smt. Meena Hemachandra, Chief General Manager-in-ChargeDepartment of Government and Bank Accounts ......................... Shri S.V. Raghavan, Chief General Manager-in-ChargeDepartment of Information Technology ........................................ G. Padmanabhan, Chief General Manager-in-ChargeDepartment of Non-Banking Supervision .................................... P. Krishnamurthy, Chief General Manager-in-ChargeDepartment of Payment and Settlement Systems ...................... A.P. Hota, Chief General ManagerDepartment of Statistics and Information Management .............. A.K. Ray, Officer-in-ChargeFinancial Markets Department ..................................................... Chandan Sinha, Chief General ManagerForeign Exchange Department .................................................... Salim Gangadharan, Chief General Manager-in-ChargeHuman Resources Development Department ............................. Deepak Singhal, Chief General ManagerInspection Department ................................................................. Karuna Sagar, Chief General ManagerInternal Debt Management Department ...................................... K.V. Rajan , Chief General ManagerLegal Department ......................................................................... K.D. Zacharias, Legal Adviser-in-ChargeMonetary Policy Department ........................................................ M.D. Patra, Adviser-in-ChargePremises Department .................................................................. Vijay Chugh, Chief General ManagerRajbhasha Department ................................................................ Smt. Phulan Kumar, Chief General ManagerRural Planning and Credit Department ........................................ G. Srinivasan, Chief General Manager-in-ChargeSecretary's Department ............................................................... Smt. Grace E Koshie, Chief General Manager & SecretaryUrban Banks Department ............................................................. A.K. Khound, Chief General Manager

COLLEGES PRINCIPALS/Chief General ManagerBankers' Training College, Mumbai ............................................. Smt. Deepali Pant JoshiCentre for Advanced Financial Learning, Mumbai ...................... -College of Agricultural Banking, Pune ......................................... Sandip GhoseReserve Bank Staff College, Chennai ......................................... S. Ganesh

OFFICES REGIONAL DIRECTORSChennai ........................................................................................ F.R. JosephKolkata .......................................................................................... B. MahapatraMumbai ......................................................................................... A.N. RaoNew Delhi ..................................................................................... R. Gandhi

BRANCHESAhmedabad .................................................................................. B. SrinivasBangalore ..................................................................................... Smt. D. MuthukrishnanBhopal ........................................................................................... Rajesh VermaBhubaneswar ................................................................................ G. Jaganmohan RaoChandigarh ................................................................................... J. SadakkadullaGuwahati ....................................................................................... Smt. Sewali ChoudhuryHyderabad .................................................................................... Smt. Suma VarmaJaipur ............................................................................................ B.P. KanungoJammu .......................................................................................... O.P. AggarwalKanpur .......................................................................................... J.B. BhoriaLucknow ........................................................................................ D.P.S. RathoreNagpur .......................................................................................... C.C. MitraPatna ............................................................................................. K.K. VohraThiruvananthapuram .................................................................... S. Ramaswamy

OFFICERS-IN-CHARGEBelapur ......................................................................................... A.K.Bera, Chief General ManagerDehradun ...................................................................................... Manoj Sharma, General ManagerKochi ............................................................................................. T.V. Gopalakrishnan, Chief General ManagerPanaji ............................................................................................ M.A.R. Prabhu, Deputy General ManagerRaipur ........................................................................................... A.K. Sharma, General ManagerRanchi ........................................................................................... Rabi N. Mishra, General ManagerShimla ........................................................................................... S.K. Bal, General Manager

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PART ONE : THE ECONOMY: REVIEW AND PROSPECTS

I. ASSESSMENT AND PROSPECTS ............................................................................... 1Assessment of 2007-08 .................................................................................................. 3Outlook for 2008-09 ........................................................................................................ 8Real Sector ..................................................................................................................... 16Fiscal Policy .................................................................................................................... 23External Sector ............................................................................................................... 26Financial Sector .............................................................................................................. 27Monetary Policy ............................................................................................................... 29

II. ECONOMIC REVIEW ..................................................................................................... 33Macroeconomic Policy Environment .................................................................. 33Real Sector Policies ................................................................................................ 33Fiscal Policy ............................................................................................................ 38External Sector Policies .......................................................................................... 43Monetary Policy Framework ................................................................................... 44Credit Delivery ......................................................................................................... 46Financial Sector Policies ......................................................................................... 46

The Real Economy ................................................................................................ 50Aggregate Supply .................................................................................................... 52Agriculture ............................................................................................................... 52Industrial Performance ............................................................................................ 57Services Sector ....................................................................................................... 65Aggregate Demand ................................................................................................. 67

Money, Credit and Prices ..................................................................................... 72Reserve Money ....................................................................................................... 72Monetary Survey ..................................................................................................... 74Price Situation ......................................................................................................... 81

Government Finances .......................................................................................... 96Central Government Finances ................................................................................ 96State Government Finances ................................................................................... 98Combined Budgetary Position of the Centre and States ........................................ 99Fiscal Outlook ......................................................................................................... 100

Financial Markets .................................................................................................. 113International Financial Markets ............................................................................... 113Domestic Financial Markets .................................................................................... 122Money Market .......................................................................................................... 122Foreign Exchange Market ....................................................................................... 125

Government Securities Market ............................................................................... 129

Credit Market ........................................................................................................... 130

Equity and Debt Markets ......................................................................................... 131

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External Sector ...................................................................................................... 139International Developments .................................................................................... 140Balance of Payments .............................................................................................. 142External Debt .......................................................................................................... 154Foreign Exchange Reserves .................................................................................. 156International Investment Position ............................................................................ 160

PART TWO: THE WORKING AND OPERATIONS OF THE RESERVE BANK OF INDIA

III. MONETARY POLICY OPERATIONS ............................................................................. 162Monetary Policy Operations: 2007-08 ........................................................................... 163Monetary Policy Operations: 2008-09 ............................................................................ 168Liquidity Management ..................................................................................................... 173

IV. CREDIT DELIVERY........................................................................................................ 181Priority Sector Lending ................................................................................................... 181Micro Finance ................................................................................................................. 192Financial Inclusion .......................................................................................................... 193Financial Literacy and Credit Counselling ...................................................................... 197Credit Information System .............................................................................................. 199

V. DEVELOPMENT AND REGULATION OF FINANCIAL MARKETS ............................. 202Money Market ................................................................................................................. 203Government Securities Market ....................................................................................... 203Foreign Exchange Market ............................................................................................... 206

VI. FINANCIAL REGULATION AND SUPERVISION.......................................................... 215Regulatory Framework for the Indian Financial System ................................................ 215Regulatory Initiatives ....................................................................................................... 217Supervisory Initiatives ..................................................................................................... 224Regional Rural Banks ..................................................................................................... 230Co-operative Banks ........................................................................................................ 231Rural Co-operatives ........................................................................................................ 235Financial Institutions ....................................................................................................... 236Non-Banking Financial Companies ................................................................................ 236

VII. PUBLIC DEBT MANAGEMENT .................................................................................... 248Central Government ........................................................................................................ 248State Governments ......................................................................................................... 256

VIII. CURRENCY MANAGEMENT ........................................................................................ 265Banknotes in Circulation ................................................................................................. 265Currency Operations ....................................................................................................... 267

IX. PAYMENT AND SETTLEMENT SYSTEMS ANDINFORMATION TECHNOLOGY .................................................................................... 274Payment and Settlement Systems ................................................................................. 274Developments in Payment and Settlement Systems ..................................................... 275Information Technology in the Reserve Bank ................................................................. 280

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X. HUMAN RESOURCE DEVELOPMENT AND ORGANISATIONAL MATTERS ........... 285Human Resource Initiatives ............................................................................................ 285Customer Service and Grievance Redressal System .................................................... 296Research Activities .......................................................................................................... 305Central Board and its Committees.................................................................................. 313

XI. THE RESERVE BANK'S ACCOUNTS FOR 2007-08 ................................................... 315Income and Expenditure ................................................................................................. 315Expenditure ..................................................................................................................... 317Balance Sheet ................................................................................................................. 319Liabilities ......................................................................................................................... 319Assets ............................................................................................................................. 320

Annex I: List of Speeches by Governor and Deputy Governors ............................ 327Annex II: List of Reports of Groups/Committees ...................................................... 329Annex III : List of Publications by the Staff of the Reserve Bank ............................ 331Annex IV: Visits of Foreign Delegations to the Reserve Bank................................. 334Annex V: Chronology of Major Policy Announcements ........................................... 336

BOXES

II.1 National Food Security Mission .............................................................................. 35

II.2 Impact of the Sixth Pay Commission on Government Finances ............................ 41

II.3 Government Securities Act, 2006 and Government Securities Regulations, 2007. 48

II.4 Payment and Settlement Systems Act, 2007 ......................................................... 49

II.5 International Comparison Programme.................................................................... 51

II.6 Recent Performance of Consumer Durables Sector: Some Perspectives ............ 60

II.7 Issues in Energy Availability and Infrastructure Development................................ 63

II.8 Contribution of the ICT Sector to the Indian Economy ........................................... 66

II.9 Conceptual Aspects of Productivity ........................................................................ 70

II.10 Money, Output and Prices ....................................................................................... 78

II.11 Controlling Food Price Inflation: Cross-country Measures ..................................... 88

II.12 Understanding Inflationary Pressures - Relevance of Core Inflation ..................... 95

II.13 Extra-budgetary Items and Government Finances ................................................. 106

II.14 Fiscal Space at the Sub-National Government Level ............................................. 108

II.15 Pattern of Public Expenditure of the State Governments ....................................... 110

II.16 The Sub-prime Lending Crisis: Issues for Financial Markets ................................. 119

II.17 Exchange Rate Regimes ........................................................................................ 128

II.18 The Corporate Bond Market in India – Current Status ........................................... 133

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II.19 Short Selling and Securities Lending and Borrowing ............................................. 135

II.20 Global Slowdown and Impact on Emerging Economies ........................................ 141

II.21 The Changing Global Economic Geography .......................................................... 143

II.22 India's Export Diversification ................................................................................... 145

III.1 Stance of Monetary Policy in India .......................................................................... 169

III.2 Challenges to Liquidity Management ..................................................................... 176

IV.1 Agricultural Debt Waiver And Debt Relief Scheme, 2008 ...................................... 187

IV.2 Financial Inclusion Fund and Financial Inclusion Technology Fund ..................... 198

IV.3 Financial Literacy and Credit Counselling Centres : Concept Paper ..................... 200

V.1 Report on Interest Rate Futures ............................................................................. 204

V.2 Government Securities Market and Primary Dealers ............................................. 206

V.3 Rupee Drawing Arrangement and Money Transfer Service Scheme .................... 208

V.4 Working Group on Currency Futures ...................................................................... 213

VI.1 Amendments to the New Capital Adequacy Framework ........................................ 219

VI.2 Guidelines on Internal Capital Adequacy Assessment Process (ICAAP) andSupervisory Review Process (SRP) ....................................................................... 220

VI.3 Advanced Approaches under Basel II ..................................................................... 221

VI.4 The Revised Guidelines on Know Your Customer andAnti-Money Laundering – Salient Features ............................................................ 222

VI.5 Fit and Proper Criteria for Elected Directors of Nationalised Banks andAssociate Banks of State Bank of India .................................................................. 225

VI.6 Guidelines on Recovery Agents .............................................................................. 229

VI.7 Unsolicited Commercial Communications – National Do Not Call Registry .......... 230

VI.8 Expeditious Settlement of Claims of Depositors of Insured Banks ........................ 232

VI.9 Impact of Vision Document on Urban Co-operative Banks .................................... 233

VI.10 Mortgage Guarantee Company .............................................................................. 238

VI.11 Lessons from Sub-Prime Crisis .............................................................................. 240

VI.12 Financial Stability Forum (FSF) Report – Status .................................................... 241

VI.13 Principle-based Regulation ..................................................................................... 242

VII.1 The Working Group on Auction Process of Government of India Securities ......... 252

VII.2 Management of States' Investment Portfolio by the Reserve Bank ....................... 260

VIII.1 Note Sorting Systems ............................................................................................. 271

VIII.2 Non-sequential Numbering of Banknotes ............................................................... 273

IX.1 Report of the Committee for Suggesting a Framework forElectronic Benefit Transfer – Major Recommendations ......................................... 278

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IX.2 Indo-Nepal Remittance Scheme – Salient Features .............................................. 280

IX.3 Convergence of Technology – New Delivery Channels ......................................... 282

IX.4 Risk Management in IT Based Operations ............................................................. 283

IX.5 Financial Sector Technology Vision Document – 2008-10 ..................................... 284

X.1 Quality Management System (QMS):ISO 9001-2000 Standards ........................... 299

X.2 Information Security Management System (ISMS ): ISO 27001-2005 Standards .... 300

X.3 Risk-Based Internal Audit ....................................................................................... 301

X.4 Communication Policy of the Reserve Bank of India ............................................. 302

X.5 Reserve Bank of India Young Scholars Scheme .................................................... 304

X.6 Select Major Decisions of the Central Information Commission ............................ 305

X.7 Database on Indian Economy (DBIE): RBI's Data Warehouse –Release of Common Site for both Intranet and Internet Users .............................. 310

X.8 Technological Innovations for Data Reporting by Banks ........................................ 311

CHARTS

II.1 Index of Industrial Production- Sectoral Growth Trends ......................................... 58

II.2 Infrastructure Industries - Sector-wise Growth ....................................................... 62

II.3 Gross Domestic Savings ......................................................................................... 71

II.4 Reserve Money Growth .......................................................................................... 72

II.5 Sources : Reserve Money ....................................................................................... 74

II.6 Monetary Aggregates .............................................................................................. 75

II.7 Fortnightly Variation in Currency in Circulation ....................................................... 76

II.8 Time Deposits and Small Savings .......................................................................... 76

II.9 Bank Credit and Investment in Government Securities .......................................... 77

II.10 Incremental Credit-Deposit Ratio ............................................................................ 77

II.11 SLR Investments of Scheduled Commercial Banks ............................................... 80

II.12 Global Inflation ........................................................................................................ 82

II.13 Inflation Movements ................................................................................................ 89

II.14 Debt Service Burden of the Central Government ................................................... 98

II.15 Major Deficit Indicators of the State Governments ................................................. 99

II.16 10-year Government Bond Yields ........................................................................... 120

II.17 Liquidity Adjustment Facility and the Call Rate ...................................................... 122

II.18 Money Market – Interest Rates and Volume .......................................................... 123

II.19 Movement of Rupee vis-à-vis Major Currencies .................................................... 126

II.20 Foreign Exchange Market Intervention and Exchange Rate .................................. 126

II.21 Rupee/US Dollar Forward Premia .......................................................................... 127

II.22 Average Daily Turnover in the Foreign Exchange Market ...................................... 127

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II.23 Yields on Central Government Securities ............................................................... 129

II.24 Turnover and Yields in the Government Securities Market .................................... 130

II.25 Resource Mobilisation in the Primary Market ......................................................... 132

II.26 Indian Stock Markets ............................................................................................... 134

II.27 Growth in World Output and Trade ......................................................................... 140

II.28 India's Invisible Receipts ......................................................................................... 146

II.29 India's share in World Exports of Goods and Services .......................................... 148

II.30 India's Current Account ........................................................................................... 151

II.31 Foreign Investment in India ..................................................................................... 153

II.32 Foreign Investment Inflows to India and Developing Countries ............................. 154

III.1 Cash Reserve Ratio ................................................................................................ 173

III.2 Repo(+)/Reverse Repo(-) under LAF ..................................................................... 177

VI.1 Frequency Distribution of CRAR of Reporting NBFCs ........................................... 244

VII.1 Cash Balance of the Central Government .............................................................. 249

VII.2 Primary Market Yields of Treasury Bills .................................................................. 250

VII.3 Weighted Average Yield of Primary Issues of Dated Securities ............................. 253

VIII.1 Share of Currency in Broad Money ........................................................................ 266

VIII.2 Banknotes in Circulation - End-March 2008 ........................................................... 267

X.1 Total Staff Strength of the Reserve Bank ................................................................ 292

XI.1 Sources of Income .................................................................................................. 316

XI.2 Major Items of Expenditure ..................................................................................... 318

XI.3 Trends in Foreign Currency and Domestic Assets (as at the end of June) ............ 321

TEXT TABLES

2.1 Growth Rates of Real GDP ..................................................................................... 50

2.2 Spatial Distribution of Rainfall ................................................................................. 52

2.3 Agricultural Production ............................................................................................ 53

2.4 Production of Major Crops ...................................................................................... 54

2.5 Gross Capital Formation in Agriculture ................................................................... 54

2.6 Management of Foodstocks ................................................................................... 56

2.7 Performance of the Industrial Sector - Growth ....................................................... 57

2.8 Index of Industrial Production: Sectoral and Use-Based Classification of Industries 58

2.9 Trends in Growth of Consumer Goods ................................................................... 59

2.10 Capacity Utilisation.................................................................................................. 61

2.11 Targets and Achievements of Infrastructure Industries .......................................... 62

2.12 Performance of Central Sector Projects ................................................................. 62

2.13 Industrial Investment Proposals .............................................................................. 64

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2.14 Mergers and Acquisitions Announced .................................................................... 64

2.15 Performance of Micro and Small Enterprises ......................................................... 65

2.16 Indicators of Service Sector Activity ........................................................................ 65

2.17 Indian IT Industry..................................................................................................... 67

2.18 Corporate Financial Performance ........................................................................... 68

2.19 Growth in Select Sources of Real Effective Demand ............................................. 69

2.20 Expenditure Side of GDP ........................................................................................ 69

2.21 Gross Capital Formation ......................................................................................... 71

2.22 Household Saving in Financial Assets .................................................................... 71

2.23 Reserve Money ....................................................................................................... 73

2.24 Monetary Indicators ................................................................................................. 75

2.25 Operations of Scheduled Commercial Banks......................................................... 77

2.26 Non-food Bank Credit - Sectoral Deployment ........................................................ 79

2.27 Select Sources of Funds to Industry ....................................................................... 80

2.28 Scheduled Commercial Banks' Non-SLR Investments .......................................... 81

2.29 Global Inflation Indicators ....................................................................................... 84

2.30 Nominal and Real Policy Rates : Select Countries ................................................ 85

2.31 International Commodity Prices .............................................................................. 86

2.32 Major Contributors to Global Headline Inflation in 2007 ......................................... 87

2.33 Key Commodity Price Inflation - Global vis-à-vis Domestic ................................... 90

2.34 Wholesale Price Inflation in India ........................................................................... 91

2.35 Consumer Price Inflation - Major Groups ............................................................... 93

2.36 Major Fiscal Indicators: Combined Finances ......................................................... 96

2.37 Major Fiscal Indicators of the Centre ...................................................................... 97

2.38 Key Deficit Indicators of the Centre for 2007-08 – Provisional Accounts ............... 98

2.39 Average Interest Rates on Outstanding Domestic Liabilities of the Centre ........... 98

2.40 Indicators of Combined Finances of the Centre and States ................................... 100

2.41 Combined Liabilities of the Centre and State ......................................................... 100

2.42 Outstanding Government Guarantees .................................................................... 101

2.43 Decomposition of the GFD of the Centre ............................................................... 101

2.44 Revenue Position of the Centre .............................................................................. 102

2.45 Gross Tax Revenues of the Centre ......................................................................... 103

2.46 Subsidies of the Centre ........................................................................................... 103

2.47 Expenditure Pattern of the Centre .......................................................................... 104

2.48 Expenditure on Select Development Heads of the Centre ..................................... 104

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2.49 Financing Pattern of Gross Fiscal Deficit of the Centre ......................................... 105

2.50 Eleventh Plan Projections vis-a-vis the Budget Estimates ..................................... 105

2.51 Deficit and Debt indicators of the Central Governments - Select Countries .......... 105

2.52 Major Deficit Indicators of the State Governments ................................................. 107

2.53 Aggregate Receipts of the State Governments ...................................................... 107

2.54 Expenditure Pattern of the State Governments ...................................................... 109

2.55 Decomposition and Financing Pattern of Gross Fiscal Deficit of States ................ 111

2.56 Measures of Deficit of the Central and State Governments ................................... 111

2.57 Combined Receipts and Disbursements of the Centre and States ........................ 112

2.58 Financing of Gross Fiscal Deficit of the Centre and States .................................... 112

2.59 Combined Expenditure of the Centre and States on the Social Sector ................. 112

2.60 Domestic Financial Markets at a Glance ................................................................ 114

2.61 Short-term Interest Rates ........................................................................................ 120

2.62 International Stock Markets..................................................................................... 121

2.63 Appreciation (+)/Depreciation (-) of the US dollar vis-à-vis other Currencies ........ 121

2.64 Activity in Money Market Segments ........................................................................ 124

2.65 Commercial Paper - Major Issuers ......................................................................... 125

2.66 Purchases and Sales of US dollars by the Reserve Bank ..................................... 126

2.67 Yield Spreads .......................................................................................................... 130

2.68 Deposit and Lending Rates .................................................................................... 131

2.69 Mobilisation of Resources from the Primary Market ............................................... 132

2.70 Indian Equity Markets - Key Indicators ................................................................... 136

2.71 BSE Sectoral Stock Indices .................................................................................... 136

2.72 Trends in Institutional Investments ......................................................................... 137

2.73 Resource Mobilisation by Mutual Funds ................................................................. 138

2.74 Funds Mobilised by Mutual Funds – Type of Schemes .......................................... 138

2.75 Resources Raised by way of Bonds/Debentures by Select All-India FIs ............... 139

2.76 Net capital Flows to Emerging Markets and Developing Economies ..................... 140

2.77 Direction of India's Exports ..................................................................................... 144

2.78 Direction of India's Imports .................................................................................... 146

2.79 India's Balance of Payments – Key indicators ........................................................ 147

2.80 Structure of India's Services Exports ...................................................................... 148

2.81 Computer and Information Services Exports .......................................................... 148

2.82 Foreign Tourist Arrivals in India and Outbound Tourist Traffic ................................ 149

2.83 Non-Software Miscellaneous Receipts and Payments ........................................... 149

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2.84 Business Services ................................................................................................... 150

2.85 Composition of Private Transfers to India ............................................................... 150

2.86 Workers' Remittances – Top Ten Remittance Receiving Countries ....................... 150

2.87 Trade and Current Account Balances in Select Countries ..................................... 151

2.88 Gross Capital Inflows and Outflows ........................................................................ 152

2.89 Foreign Investment Flows to India .......................................................................... 152

2.90 Foreign Direct Investment Flows to India: Country-wise and Sector-wise ............. 153

2.91 India's Direct Investment Abroad ............................................................................ 154

2.92 Foreign Direct and Portfolio Investment in Select Countries .................................. 155

2.93 Balances under NRI Deposit Schemes .................................................................. 155

2.94 India's Grants and Loans to Foreign Governments ................................................ 155

2.95 India's External Debt ............................................................................................... 156

2.96 External Debt Service Payments ............................................................................ 156

2.97 International Comparison of Top Twenty Debtor Countries .................................... 157

2.98 Foreign Exchange Reserves .................................................................................. 158

2.99 Foreign Exchange Reserves of the Top Ten EMEs ................................................ 158

2.100 Deployment Pattern of Foreign Currency Assets ................................................... 159

2.101 International Investment Position of India ............................................................... 160

2.102 International Investment Position: Select Countries ............................................... 161

2.103 International Liabilities and Assets of Banks in India ............................................. 161

3.1 Movements in Key Policy Rates and Reserve Requirements ................................ 166

3.2 Interest Rate Structure for Non-Resident Deposits ................................................ 174

3.3 Liquidity Management ............................................................................................. 174

3.4 Monthly Primary Liquidity Flows and Open Market Operations ............................. 175

3.5 Reserve Bank's Liquidity Management Operations................................................ 177

3.6 Reserve Bank's Holdings of Central Government Dated Securities ...................... 179

3.7 Reverse Repo/Repo Bids under LAF ..................................................................... 180

4.1 Priority Sector Advances ......................................................................................... 182

4.2 Outstanding Agricultural Advances ......................................................................... 183

4.3 Disbursement under Special Agricultural Credit Plans ........................................... 183

4.4 Targets and Actual Disbursement to Agriculture by Banks ..................................... 184

4.5 Public Sector Banks - Recovery of Direct Agricultural Advances ........................... 185

4.6 Bank Credit to Micro and Small Enterprises by Public Sector Banks .................... 188

4.7 Credit to Sick, Micro and Small Enterprises ........................................................... 189

4.8 Bank Loans Outstanding Against SHGs – As on March 31, 2007 ......................... 193

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4.9 Number of No Frills Accounts ................................................................................. 194

6.1 Offices of Indian Banks Opened Abroad – July 2007 to June 2008 ....................... 223

6.2 Offices of Foreign Banks Opened in India – July 2007 to June 2008 .................... 223

6.3 Resolution of NPAs ................................................................................................. 224

6.4 Frauds in the Banking Sector ................................................................................. 226

6.5 Select Financial Indicators ...................................................................................... 243

6.6 Scheduled Commercial Banks – Frequency Distribution of CRAR ....................... 243

6.7 CRAR and Net NPAs of Select Financial Institutions ............................................. 244

6.8 Scheduled Commercial Banks – Performance Indicators ...................................... 244

6.9 Net NPAs to Net Advances of Scheduled Commercial Banks ............................... 245

6.10 Net NPAs to Net Advances of Scheduled Urban Co-operative Banks ................... 245

6.11 Operational Results of Scheduled Commercial Banks – Key Ratios ..................... 245

6.12 Operational Results of Scheduled Commercial Banks – 2007-08 ......................... 246

6.13 Operational Results of Scheduled Urban Co-operative Banks – Key Ratios ........ 246

7.1 Additional Borrowings through Treasury Bills toFinance Transfer of the Reserve Bank's Stake in SBI ............................................ 250

7.2 Profile of Treasury Bills ........................................................................................... 250

7.3 Treasury Bills – Primary Market .............................................................................. 251

7.4 Gross and Net Market Borrowings of the Central Government .............................. 252

7.5 Central Government's Market Loans - A Profile ..................................................... 253

7.6 Primary Cut-off Yield and Prevailing Secondary Market Yield ............................... 254

7.7 Maturity Profile of Central Government Dated Securities....................................... 254

7.8 Repayment Schedule of Centre's Outstanding Market Loans ............................... 254

7.9 Interest Rate Profile of the Outstanding Stock of Central Government Securities . 255

7.10 Indicative Calendar and Actual Borrowings of Central Government - 2008-09 ..... 256

7.11 WMA/Overdrafts of the State Governments ........................................................... 257

7.12 State and Union Territory-wise Availment of WMA/Overdraft ................................. 257

7.13 Normal WMA Limits of the States/UT ..................................................................... 258

7.14 Investments of the State Governments/UT ............................................................. 259

7.15 Annual Market Borrowings of the State Governments ........................................... 261

7.16 Month-wise Market Borrowings of the State Governments .................................... 261

7.17 Frequency Distribution of Tranches of Auctions during 2007-08 ........................... 262

7.18 Yield on State Government Securities .................................................................... 262

7.19 Weighted Average Spreads during 2007-08 ........................................................... 262

7.20 Interest Rate Profile of the Outstanding Stock of State Government Securities .... 263

7.21 Maturity Profile of Outstanding State Government Securities ................................ 263

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7.22 Maturity Profile of Outstanding State Loans and Power Bonds.............................. 264

8.1 Banknotes in Circulation ......................................................................................... 266

8.2 Coins in Circulation ................................................................................................. 267

8.3 Currency Chests ..................................................................................................... 268

8.4 Volume of Banknotes Indented and Supplied ........................................................ 268

8.5 Value of Banknotes Indented and Supplied ........................................................... 269

8.6 Supply and Cost of Banknotes ............................................................................... 269

8.7 Indent and Supply of Coins ..................................................................................... 270

8.8 Disposal of Soiled Notes and Supply of Fresh Banknotes ..................................... 270

8.9 Counterfeit Notes Detected .................................................................................... 271

8.10 Counterfeit Notes Detected at the Reserve Bank and Bank Branches.................. 272

9.1 Payment System Indicators – Annual Turnover ...................................................... 276

9.2 Retail Electronic Funds Transfer Systems.............................................................. 277

9.3 Card-Based Payments ............................................................................................ 278

9.4 RTGS Transactions ................................................................................................. 279

9.5 Critical IT Implementation Factors in 2007-08 ........................................................ 281

10.1 Reserve Bank Training Establishments - Programmes Conducted ....................... 286

10.2 Select Programmes/Seminars/Workshops Conducted byTraining Colleges during 2007-08 ........................................................................... 287

10.3 Number of officers Trained in External Training Institutions in India and Abroad .. 288

10.4 Courses Conducted under Joint India-IMF Training Programme - Pune ............... 290

10.5 Recruitment by the Reserve Bank - 2007 ............................................................... 292

10.6 Staff Strength of the Reserve Bank ......................................................................... 292

10.7 Category-wise Actual Staff Strength ....................................................................... 293

10.8 Department-wise Staff Strength of the Reserve Bank- As on December 31, 2007 294

10.9 Office-wise Staff Strength of the Reserve Bank ...................................................... 295

10.10 Right to Information Act - Requests Received and Resolved ................................ 304

10.11 Awards Conferred on Members of the Central Board of the Reserve Bank ......... 314

11.1 Trends in Gross Income, Expenditure and Net Disposable Income ...................... 315

11.2 Gross Income .......................................................................................................... 316

11.3 Contingency and Asset Development Reserves and Surplus Transfer to the Government 316

11.4 Earnings from Foreign Sources .............................................................................. 317

11.5 Earnings from Domestic Sources ........................................................................... 317

11.6 Expenditure ............................................................................................................. 318

11.7 Balances in Currency and Gold Revaluation Account and Exchange Equalisation Account 320

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11.8 Balances in Contingency Reserve and Asset Development Reserve .................... 320

11.9 Outstanding Foreign Currency and Domestic Assets ............................................. 320

11.10 Investments in Shares of Subsidiaries/Associate Institutions ................................ 321

INDEX OF APPENDIX TABLES

1 Select Macroeconomic and Financial Indicators .................................................... 357

2 Growth Rates and Sectoral Composition of Real Gross Domestic Product .......... 358

3 Quarterly Growth Rates and Sectoral Composition of Real Gross Domestic Product 359

4 Agricultural Production ............................................................................................ 360

5 Procurement, Offtake and Stocks of Foodgrains .................................................... 361

6 Trends in Index of Industrial Production ................................................................. 362

7 Growth in Index of Seventeen Major Industry Groups of the Manufacturing Sector 363

8 Frequency Distribution of Growth Rates of Seventeen Major Industry Groups ofthe Manufacturing Sector ........................................................................................ 364

9 Use-based Classification of Industrial Production .................................................. 365

10 Growth of Six Infrastructure Industries ................................................................... 366

11 Gross Domestic Saving and Investment................................................................. 367

12 Financial Saving of the Household Sector (Gross) ................................................ 368

13 Variations in Reserve Money .................................................................................. 369

14 Reserve Bank of India (RBI) Survey ....................................................................... 370

15 Variations in Money Stock ....................................................................................... 371

16 New Monetary Aggregates ...................................................................................... 372

17 Liquidity Aggregates ................................................................................................ 373

18 Important Banking Indicators - Scheduled Commercial Banks .............................. 374

19 Commercial Bank Survey ....................................................................................... 375

20 Sectoral Deployment of Gross Bank Credit ............................................................ 376

21 Industry-wise Deployment of Gross Bank Credit .................................................... 377

22 Reserve Bank's Accommodation to Scheduled Commercial Banks ...................... 378

23 Variations in Index Numbers of Wholesale Prices ................................................. 379

24 Variations in Wholesale Prices - Weighted Contributions ...................................... 380

25 Annualised Variations in Price Indices .................................................................... 381

26 Measures of Deficit of the Central Government ..................................................... 382

27 Major Items of Receipts and Expenditures of the Central Government ................. 383

28 Financing of Gross Fiscal Deficit of the Central Government ................................ 38429 Outstanding Liabilities of the Central Government ................................................. 385

30 Budgetary Operations of the State Governments ................................................... 386

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31 Financing of Gross Fiscal Deficitand Outstanding Liabilities of the State Governments............................................ 387

32 Direct and Indirect Tax Revenues of the Central and the State Governments ....... 388

33 Combined Receipts and Disbursements of the Central and State Governments .. 389

34 Market Borrowings of Central and State Governments .......................................... 390

35 Repo/Reverse Repo Auctions under Liquidity Adjustment Facility ........................ 391

36 Issue of Certificates of Deposit by Scheduled Commercial Banks ........................ 398

37 Commercial Paper .................................................................................................. 399

38 Indices of Real Effective Exchange Rate (REER) andNominal Effective Exchange Rate (NEER) of the Indian Rupee ........................... 400

39 Inter-bank and Merchant Transactions in the Foreign Exchange Market .............. 401

40 Secondary Market Transactions in Government Securities ................................... 402

41 Interest Rate Structure of Scheduled Commercial Banks ...................................... 403

42 New Capital Issues by Non-Government Public Limited Companies .................... 404

43 Domestic Stock Indices ........................................................................................... 405

44 Major Indicators of Domestic Equity Markets ......................................................... 406

45 Turnover in the Equity Derivatives Market .............................................................. 407

46 Financial Assistance Sanctioned and Disbursed by Financial Institutions............. 408

47 Select Economic Indicators - World ........................................................................ 409

48 India's Foreign Trade .............................................................................................. 410

49 India's Exports of Principal Commodities ............................................................... 411

50 India's Imports of Principal Commodities ............................................................... 412

51 India's Overall Balance of Payments ...................................................................... 413

52 Invisibles by Category of Transactions ................................................................... 414

53 Composition of Capital Inflows ............................................................................... 415

54 External Assistance ................................................................................................. 416

55 India's External Debt ............................................................................................... 417

56 India's Foreign Exchange Reserves ....................................................................... 419

57 Interest Rates on Export Credit .............................................................................. 420

58 Profile of Treasury Bills ........................................................................................... 421

59 Profile of Central Government Dated Securities .................................................... 422

60 Issuances of Central Government Dated Securities .............................................. 423

61 Market Borrowings Programme of the State Governments/Union Territories ........ 425

62 Market Borrowings of the State Governments/U.T. Raised Through Auctions: 2007-08 426

63 Weighted Average Yield of Market Borrowings by the States/U.T.................................. 429

LIST OF ABBREVIATIONS

xiv

ABCP - Asset Backed Commercial Paper

ABSs - Asset Backed Securities

ACH - Automated Clearing Houses

ACU - Asian Clearing Union

ACU - Additional Competitive Underwriting

ADB - Asian Development Bank

ADR - Asset Development Reserve

ADRs - American Depository Receipts

ADs - Authorised Dealers

ADWRS - Agricultural Debt Waiver and Debt ReliefScheme

AFC - Asset Finance Company

AFI Annual Financial Inspection

AFS - Available for Sale

AIBP - Accelerated Irrigation Benefit Programme

AIDIS - All India Debt and Investment Survey

AIFI - All India Financial Institution

AIRB - Advanced Internal Rating Based Approach

ALD - Aggregate Liability to Depositors

ALM - Asset-Liability Management

AMA - Advanced Measurement Approach

AMCs - Authorised Money Changers

AML - Anti-Money Laundering

AMP - Advanced Measurement Approach

AMPIs - Aggregated Micro-Prudential Indicators

ANBC - Adjusted Net Bank Credit

APL - Above Poverty Line

APM - Administered Price Mechanism

ARC - Asset Reconstruction Company

AS - Accounting Standard

ASEAN - Association of South East Asian Nations

ATB - Auction Treasury Bill

ATM - Automated Teller Machine

BCs - Business Correspondents

BCBS - Basel Committee on Banking Supervision

BCP - Business Continuity Planning

BCSBI - Banking Codes and Standards Board of India

BCTT - Banking Cash Transaction Tax

BFS - Board for Financial Supervision

BIA - Basic Indicator Approach

BIFR - Board for Industrial and FinancialReconstruction

BIS - Bank for International Settlements

BLA - Bond Ledger Account

BoP - Balance of Payments

BOS - Banking Ombudsman Scheme

BPL - Below Poverty Line

BPLR - Benchmark Prime Lending Rate

BPO - Business Process Outsourcing

BPSS - Board for Regulation and Supervision ofPayment and Settlement Systems

BRBNMPL - Bharatiya Reserve Bank Note Mudran PrivateLimited

BSE - The Stock Exchange, Mumbai

BSR - Basic Statistical Returns

BTC - Bankers' Training College

CA - Concurrent Audit

CAB - College of Agricultural Banking

CAPIO - Central Assistant Public Information Officer

CBLO - Collateralised Borrowing and LendingObligation

CBS - Consolidated Banking Statistics

CBS - Core Banking System

CCC - Central Complaints Committee

CCEA - Cabinet Committee on Economic Affairs

CCIL - Clearing Corporation of India Limited

CCP - Central Counter Party

CCRS - Currency Chest Reporting System

CD - Certificate of Deposit

CDBMS - Centralised Data Base Management System

CDOs - Collateralised Debt Obligations

xv

LIST OF ABBREVIATIONS

CDR - Corporate Debt Restructuring

CDSs - Credit Default Swaps

CENVAT - Central Value Added Tax

CFCAC - Committe on Fuller Capital AccountConvertibility

CFES - Centralised Funds Enquiry System

CFMS - Centralised Funds Management System

CFT - Combating Financing of Terrorism

CFTS - Centralised Funds Transfer System

CGRA - Currency and Gold Revaluation Account

CIB - Capital Indexed Bond

CIBIL - Credit Information Bureau of India Limited

CIC - Central Information Commissioner

CICTAB - Center for International Co-operation andTraining in Agricultural Banking

CLCC - Central Level Coordination Committee

CME - Capital Market Exposure

CMIS - Currency Management Information System

COMORS - Compliance Monitoring and Reporting System

CoR - Certificate of Registration

CP - Commercial Paper

CPADS - Centralised Public Accounts DepartmentSystem

CPC - Cheque Processing Centre

CPDO - Centralised Public Debt Office

CPI - Consumer Price Index

CPI-IW - Consumer Price Index for Industrial Workers

CPIO - Chief Public Information Officer

CPPAPS - Committee on Procedures and PerformanceAudit on Public Services

CPR - Consolidated Prudential Return

COSMOS - Centralised Off-Site Monitering System

CR - Contingency Reserve

CRAR - Capital to Risk-Weighted Assets Ratio

CRB - Commodity Research Bureau

CRC - The Complaints Redressal Cell

CRF - Calamity Relief Fund

CRCS - Central Registrar of Co-operative Societies

CRR - Cash Reserve Ratio

CRT - Credit - Risk Transfer

CSAA - Control Self Assessment Audit

CSF - Consolidated Sinking Fund

CSGL - Constituents' Subsidiary General Ledger

CSO - Central Statistical Organisation

CSR - Corporate Social Responsibility

CST - Central Sales Tax

CTR - Cash Transaction Report

CTS - Cheque Truncation System

CTT - Commodities Transaction Tax

CVD - Countervailing Duty

CVPS - Currency Verification and Processing System

DAD - Deposit Accounts Department

DAPM - Department of Administration and PersonnelManagement

DBIE - Database on Indian Economy

DBOD - Department of Banking Operations andDevelopment

DBS - Department of Banking Supervision

DCC - District Consultative Committee

DCCB - District Central Cooperative Bank

DCM - Department of Currency Management

DCRF - Debt Consolidation and Relief Facility

DDP - District Development Programme

DDT - Dividend Distribution Tax

DEAP - Department of Economic Analysis and Policy

DEBC - Department of Expenditure and BudgetaryControl

DEIO - Department of External Investments andOperations

DEPB - Duty Entitlement Pass Book

DESACS - Department of Statistical Analysis andComputer Services

DFEC - Duty Free Entitlement Certificate

DFHI - Discount and Finance House of India

LIST OF ABBREVIATIONS

xvi

DFIs - Development Finance Institutions

DFRC - Duty Free Replenishment Certificate

DGBA - Department of Government and BankAccounts

DGCI&S - Directorate General of CommercialIntelligence and Statistics

DGFT - Directorate General of Foreign Trade

DICGC - Deposit Insurance and Credit GuaranteeCorporation

DIP - Disclosure and Investor Protection

DIT - Department of Information Technology

DLCC - District Level Consultative Committee

DMA - Direct Marketing Agent

DMIS - Document Management Information System

DNBS - Department of Non-Banking Supervision

DOC - Department of Communication

DoT - Department of Telecommunications

DPAP - Drought Prone Area Programme

DR - Disaster Recovery

DRG - Development Research Group

DRI - Differential Rate of Interest

DRS - Disaster Recovery System

DRT - Debt Recovery Tribunal

DSA - Direct Selling Agent

DSB - Designated Settlement Banks

DSIM - Department of Statistics and InformationManagement

DSS - Debt Swap Scheme

DTA - Domestic Tariff Area

DTL - Demand and Time Liabilities

DvP - Delivery versus Payment

EAD - Exposure at Default

EBT - Electronic Benefit Transfer

ECBs - External Commercial Borrowings

ECB - European Central Bank

ECBC - Energy Conservation Building Code

ECR - Export Credit Refinance

ECS - Electronic Clearing Services

EDC - Executive Directors' Committee

EDI - Entrepreneurship Development Institute

EDI - Electronic Data Interchange

EEA - Exchange Equalisation Account

EEFC - Exchange Earners' Foreign Currency

EEPC - Engineering Export Promotion Council

EFT - Electronic Funds Transfer

EIA - Energy Information Administration

EKMS - Enterprise Knowledge Management System

EMDEs - Emerging Market and Developing Economics

EMEs - Emerging Market Economies

EOU - Export Oriented Unit

EPCG - Export Promotion Capital Goods

ESOP - Employees Stock Option Plan

EU - European Union

FAQs - Frequently Asked Questions

FBT - Fringe Benefit Tax

FCA - Foreign Currency Assets

FCAC - Fuller Capital Account Convertibility

FCCB - Foreign Currency Convertible Bond

FCI - Food Corporation of India

FCNR(B) - Foreign Currency Non-Resident (Banks)

FCRA - Forward Contract Regulation Act

FDI - Foreign Direct Investment

FED - Foreign Exchange Department

FEDAI - Foreign Exchange Dealers' Association ofIndia

FEMA - Foreign Exchange Management Act

FFMCs - Full Fledged Money Changers

FIF - Financial Inclusion Fund

FIIs - Foreign Institutional Investors

FIMMDA - Fixed Income Money Market and DerivativesAssociation of India

FIPB - Foreign Investment Promotion Board

FIRB - Foundation Internal Rating Based

xvii

LIST OF ABBREVIATIONS

FIs - Financial Institutions

FITF - Financial Inclusion Technology Fund

FLCC - Financial Literacy and Credit CounselingCentre

FIU-IND - Financial Intelligence Unit-India

FMC - Forward Market Commission

FMD - Financial Markets Department

FMS - Focus Market Scheme

FNVC - Forged Note Vigilance Cell

FOB - Free on Board

FOMC - Federal Open Market Committee

FPOs - Follow-on Public Offers

FPS - Focus Product Scheme

FRA - Forward Rate Agreement

FRB - Floating Rate Bond

FRBM - Fiscal Responsibility and Budget Management

FRL - Full Reservoir Level

FRL - Fiscal Responsibility Legislation

FSA - Financial Services Authority

FSF - Financial Stability Forum

FST - Financial Sector Technology

FTIs - Fast Track Issues

FTP - Financial Transaction Plan

GAAP - Generally Accepted Accounting Principles

GATS - General Agreement on Trade in Services

GB - Giga-bytes

GCC - General Credit Card

GDP - Gross Domestic Product

GDR - Global Depository Receipt

GDS - Gross Domestic Saving

GFCF - Gross Fixed Capital Formation

GFD - Gross Fiscal Deficit

GIPSA - General Insurer's (Public Sector) Associationof India

GLC - General Line of Credit

GNP - Gross National Product

GoI - Government of India

GRF - Guarantee Redemption Fund

GS - Government Securities

GSDP - Gross State Domestic Product

GST - Goods and Services Tax

HFCs - Housing Finance Companies

HFT - Held for Trading

HLAC - High Level Advisory Committee

HRDD - Human Resources Development Department

HRMS - Human Resources Management System

HTM - Held to Maturity

HUF - Hindu Undivided Family

IAS - Integrated Accounting System

IASC - Inspection and Audit Sub-Committee

IBA - Indian Banks' Association

IBL - Inter-Bank Liabilities

IBS - International Banking Statistics

ICAAP - Internal Capital Adequacy AssessmentProcess

ICAI - Institute of Chartered Accountants of India

ICC - International Credit Card

ICCOMS - Integrated Computerised Currency Operationand Management System

ICOR - Incremental Capital-Output Ratio

ICP - International Comparison Programme

ICT - Information and Communication Technology

IDBI - Industrial Development Bank of India

IDL - Intra-Day Liquidity

IDMD - Internal Debt Management Department

IDR - Indian Depository Receipt

IDRBT - Institute for Development and Research inBanking Technology

IEA - International Energy Agency

IES - Integrated Establishment System

IFC - International Finance Corporation

IGIDR - Indira Gandhi Institute of DevelopmentResearch

LIST OF ABBREVIATIONS

xviii

IIBF - Indian Institute of Banking and Finance

IIBI - Industrial Investment Bank of India Ltd.

IIFCL - India Infrastructure Finance Company Limited

IIM - Indian Institute of Management

IIP - Index of Industrial Production

IIT - Indian Institute of Technology

IIUS - Industrial Infrastructure Upgradation Scheme

IMA - Internal Models Approach

IMD - India Millennium Deposits

IMF - International Monetary Fund

IMFC - International Monetary and FinancialCommittee

INFINET - Indian Financial Network

IPC - Irrevocable Payment Commitments

IPDI - Innovative Perpetual Debt Instrument

IPO - Initial Public Offering

IPP - Independent Power Producers

IRB - Internal Rating Based

IRDA - Insurance Regulatory and DevelopmentAuthority

IRDs - Interest Rate Derivatives

IRF - Interest Rate Future

IRS - Interest Rate Swap

IS - Information System

ISMS - Information Security Management System

ISO - International Organisation for Standardisation

IT - Information Technology

ITB - Intermediate Treasury Bill

ITES-BPO - Information Technology Enabled Services andBusiness Process Outsourcing

JNNURM - Jawaharlal Nehru National Urban RenewalMission

JPC - Joint Parliamentary Committee

JV - Joint Venture

KCC - Kisan Credit Card

KYC - Know Your Customer

LAB - Local Area Bank

LAF - Liquidity Adjustment Facility

LAN - Local Area Network

LaR - Liquidity at Risk

LBS - Locational Banking Statistics

LC - Letter of Credit

LGD - Loss Given Default

LIBOR - London Inter-Bank Offered Rate

LIC - Life Insurance Corporation of India

LOC - Letter of Comfort

LPG - Liquefied Petroleum Gas

LPA - Long Period Average

LRS - Liberalised Remittance Scheme

LTV - Loan to Value

LVPS - Large Value Payment Systems

M&A - Merger and Acquisition

MASI - Management Audit Systems Inspection

MAT - Minimum Alternate Tax

MBC - Mutual Benefit Companies (Potential Nidhi)

MBFC - Mutual Benefit Financial Companies (NotifiedNidhis)

MBS - Mortgage-Backed Securities

MEI - Macro Economic Indicators

MEP - Minimum Export Price

MF - Mutual Fund

MFI - Micro Finance Institution

MGC - Mortgage Guarantee Company

MICR - Magnetic Ink Character Recognition

MIS - Management Information System

MMBCS - Magnetic Media Based Clearing System

MMS - Multi Modal Settlements

MNSB - Multilateral Net Settlement Batch

MoU - Memorandum of Understanding

MPI - Macro-Prudential Indicator

MPLS - Multi Protocol Label Switching

MPP - Merchant Power Producers

MS - Money Supply (Broad Money)

xix

LIST OF ABBREVIATIONS

MSCI - Morgan Stanley Capital International

MSEs - Micro and Small Enterprises

MSMEs - Micro, Small and Medium Enterprises

MSP - Minimum Support Price

MSS - Market Stabilisation Scheme

MTFP - Medium Term Fiscal Plan

MTM - Marked to Market

MTSS - Money Transfer Service Scheme

MUC - Minimum Underwriting Commitment

MW - Mega Watts

NABARD - National Bank for Agriculture and RuralDevelopment

NASSCOM - National Association of Software and ServicesCompanies

NAV - Net Asset Value

NBC - National Building Code

NBER - National Bureau of Economic Research

NBFCs - Non-Banking Financial Companies

NBFIs - Non-Banking Financial Institutions

NCAER - National Council of Applied EconomicResearch

NCAF - New Capital Adequacy Framework

NCC - National Clearing Cell

NDA - Net Domestic Asset

NDC - No Dues Cretificate

NDC - National Development Council

NDNC - National Do Not Call Registry

NDS - Negotiated Dealing System

NDS - OM - Negotiated Dealing System - Order Matching

NDTL - Net Demand and Time Liability

NEER - Nominal Effective Exchange Rate

NEFT - National Electronic Funds Transfer

NEP - National Electricity Policy

NER - North - Eastern Region

NFA - Net Foreign Assets

NFDC - National Film Development Corporation

NFEA - Net Foreign Exchange Assets

NFFWP - National Food for Work Programme

NFR - Non-Financial Reporting

NFS - National Financial Switch

NFSM - National Food Security Mission

NGO - Non-Government Organisation

NHB - National Housing Bank

NIBM - National Institute of Bank Management

NIC - National Informatics Centre

NIF - National Investment Fund

NIMC - National Implementing and MonitoringCommittee

NMCP - National Manufacturing CompetitivenessProgramme

NOC - No Objection Certificate

NOF - Net Owned Funds

NPAs - Non-Performing Assets

NPC - National Payments Council

NPS - New Pension Scheme

NPV - Net Present Value

NR(E)RA - Non-Resident (External) Rupee Account

NREGF - National Rural Employment Guarantee Fund

NREGS - National Rural Employment GuaranteeScheme

NRHM - National Rural Health Mission

NRI - Non-Resident Indian

NRNR - Non-Resident Non-Repatriable

NRO - Non-Resident Ordinary

NRRDA - National Rural Road Development Agency

NSC - National Statistical Commission

NSDL - National Securities Depository Limited

NSE - National Stock Exchange

NSE-MIBOR- National Stock Exchange-Mumbai Inter-bankOffered Rate

NSMs - Note Sorting Machines

NSS - National Settlement System

NSSF - National Small Saving Fund

NSSO - National Sample Survey Organisation

LIST OF ABBREVIATIONS

xx

OBC - Other Backward Classes

OBE - Off- Balance Sheet Exposures

OBU - Off-shore Banking Unit

OCBs - Overseas Corporate Bodies

ODI - Overseas Direct Investment

OIL - Oil India Ltd.

OLTAS - Online Tax Accounting System

OMCs - Oil Marketing Companies

OMO - Open Market Operation

OMS - Open Market Sales

ONGC - Oil and Natural Gas Commission

OPAC - Online Public Access Catalogue

OPEC - Organisation of Petroleum ExportingCountries

ORFS - Online Returns Filing System

OSMOS - Off-Site Monitoring System

OSMOS - Off-Site Monitoring and Surveillance

OTC - Over-the-Counter

OTCEI - Over-the-Counter Exchange of India

OTS - One-Time Settlement

OWS - Other Welfare Schemes

P&L - Profit and Loss

P/E - Price-Earnings

PACS - Primary Agricultural Credit Society

PAD - Public Accounts Department

PAIS - Personal Accident Insurance Scheme

PAT - Profit After Tax

PBT - Profit Before Tax

PCA - Prompt Corrective Action

PCPS - Perpetual Cumulative Preference Shares

PD - Probability of Default

PDCF - Primary Dealer Credit Facility

PDO - Public Debt Office

PDs - Primary Dealers

PDS - Public Distribution System

PFCE - Private Final Consumption Expenditure

PIO - Persons of Indian Origin

PIT - Personal Income Tax

PKI - Public Key Infrastructure

PMEGP - Prime Minister Employment GenerationProgramme

PMLA - Prevention of Money Laundering Act

PNCPs - Perpetual Non-Cumulative Preference Shares

POL - Petroleum, Oil and Lubricants

PPP - Public Private Partnership

PRIS - Performance Related Incentive Scheme

PSBs - Public Sector Banks

PSUs - Public Sector Undertakings

QIB - Qualified Institutional Buyer

QII - Qualified Institutional Investor

QIP - Qualified Institutional Placement

QIS - Quantitative Impact Study

R&D - Research and Development

RBIA - Risk-Based Internal Audit

RBS - Risk-Based Supervision

RBSB - Reserve Bank Services Board

RBSC - Reserve Bank Staff College

RC - Reconstruction Company

RCC - Regional Complaints Committee

RCPS - Redeemable Cumulative Preference Shares

RCS - Registrar of Cooperative Societies

RD - Revenue Deficit

RDA - Rupee Drawing Arrangements

RDDB - Recovery of Debts due to Banks and FinancialInstitutions

REER - Real Effective Exchange Rate

RIA - Right to Information Act

RIDF - Rural Infrastructure Development Fund

RIF - Repository of Inspecting Finding

RKVY - Rashtriya Krishi Vikas Yojana

RNBCs - Residuary Non-banking Companies

RNCPS - Redeemable Non-Cumulative PreferenceShares

xxi

LIST OF ABBREVIATIONS

RPCD - Rural Planning and Credit Department

RRBs - Regional Rural Banks

RTGS - Real Time Gross Settlement

RTP - Reserve Tranche Position

RUDSETIs - Rural Development and Self-EmployedTraining Institutes

SA - Standardised Approach

SAARC - South Asian Association for RegionalCooperation

SACP - Special Agricultural Credit Plan

SAFTA - South Asian Free Trade Agreement

SARFAESI - Securitisation and Reconstruction of FinancialAssets and Enforcement of Security Interest

SBI - State Bank of India

SBS - Shredding and Briquetting System

SC - Scheduled Caste

SC - Securitisation Company

SCB - Scheduled Commercial Bank

SCRA - Securities Contracts (Regulation) Act

SD - Sustainable Development

SDDS - Special Data Dissemination Standard

SDL - State Development Loan

SDLC - Software Development Life Cycle

SDR - Special Drawing Right

SEB - State Electricity Board

SEBI - Securities and Exchange Board of India

SEC - Securities Exchange Commission

SEFT - Special Electronic Funds Transfer

SEEPZ - Santacruz Electronics Exports ProcessingZone

SEZs - Special Economic Zones

SFC - State Financial Corporation

SFIO - Serious Frauds Investigation Office

SFMS - Structured Financial Messaging Solution

SFP - Single Factor Productivity

SGL - Subsidiary General Ledger

SGSY - Swarnajayanti Gram Swarozgar Yojana

SHGs - Self-Help Groups

SIDBI - Small Industries Development Bank of India

SIPS - Systemically Important Payment Systems

SITP - Scheme for Integrated Textile Parks

SIVs - Structured Investment Vehicles

SLAF - Second Liquidity Adjustment Facility

SLB - Securities Lending and Borrowing

SLBC - State Level Bankers' Committee

SLCC - State Level Coordination Committee

SLR - Statutory Liquidity Ratio

SLRS - Scheme of Liberation and Rehabilitation of

Scavengers

SLS - Securities Lending Scheme

SMAC - Secondary Market Advisory Committee

SMEs - Small and Medium Enterprises

SMO - Special Market Operation

SNB - Swiss National Bank

SPC - Sixth Pay Commission

SPMCIL - Security Printing and Minting Corporation of

India Ltd.

SPV - Special Purpose Vehicle

SR - Security Receipt

SREP - Strategic Research and Extension Plan

SRF - Special Reserve Fund

SRMS - Scheme for Rehabilitation of Manual

Scavengers

SRP - Supervisory Review Process

SRS - System Requirement Specification

SSA - Sarva Shiksha Abhiyan

SSCs - Special Sub-Committees

SSIs - Small Scale Industries

SSSs - Securities Settlement Systems

ST - Scheduled Tribe

StCB - State Co-operative Bank

STCRC - Short Term Co-operative Rural Credit

LIST OF ABBREVIATIONS

xxii

STL - Structural Liquidity Statement

STOs - State Treasury Offices

STP - Straight Through Processing

STPI - Software Technology Parks of India

STR - Suspicious Transaction Report

STRIPS - Separate Trading for Registered Interest andPrincipal of Securities

STT - Securities Transaction Tax

TAC - Technical Advisory Committee

TAF - Term Auction Facility

TAFCUB - Task Force for Urban Co-operative Bank

TAG - Technical Advisory Group

TBs - Treasury Bills

TDS - Tax Deduction at Source

TFC - Twelfth Finance Commission

TFCI - Tourism Finance Corporation of India

TFP - Total Factor Productivity

TMT - Thermo Mechanically Treated

TPDS - Targeted Public Distribution System

TRAI - Telecom Regulatory Authority of India

TUCC - Telecom Unsolicited CommercialCommunications

TUF - Technology Upgradation Fund

UBD - Urban Banks Department

UCBs - Urban Cooperative Banks

ULIP - Unit Linked Insurance Plan

UNCTAD - United Nations Conference on Trade andDevelopment

UNDP - United Nations Development Programme

UNIDO - United Nations Industrial DevelopmentOrganisation

UNSCR - United Nations Security Council Regulations

UNSNA - United Nation System of National Accounts

URR - Unremunerated Reserve Requirements

URRBCH - Uniform Regulations and Rules for Bankers'Clearing House

UTLBC - Union Territory Level Bankers' Committee

VaR - Value at Risk

VAT - Value Added Tax

VCF - Venture Capital Fund

WADR - Weighted Average Discount Rate

WAN - Wide Area Network

WAP - Wireless Application Protocol

WDM - Wholesale Debt Market

WFP - World Food Programme

WGC - World Gold Council

WI - When Issued

WMA - Ways and Means Advance

WOS - Wholly Owned Subsidiary

WPI - Wholesale Price Index

WSS - Weekly Statistical Supplement

WTI - West Texas Intermediate

WTO - World Trade Organisation

Y-o-Y - Year-on-Year

YTM - Yield-to-Maturity

ZCYC - Zero Coupon Yield Curve

ZTC - Zonal Training Centre

This Report can also be accessed on InternetURL : www.rbi.org.in

1

I.1 The Indian economy continued to performwell during 2007-08, although the growth moderatedmarginally. This was the third year in succession whenthe Indian economy achieved a growth rate of 9 percent and above. This was the highest average growthrate achieved during any three year period in thehistory of independent India. During each of the lastthree years, the growth rate of agriculture was wellabove the trend growth rate with foodgrainsproduction touching a new high in each of the lasttwo years. Industry also registered robust growth withthe growth rate in the previous year being in doubledigits. Services exhibited double digit growth in allthe three years. Although the Indian economy hasbeen generally performing well in the post-reformperiod, the performance during the last three yearswas indeed noteworthy and it was second only toChina among the major countries.

I.2 The improved performance in the last threeyears was the result of the well thought out andcalibrated reforms pursued in the various sectorsduring the last one decade and a half. The highgrowth rate was underpinned by a distinctimprovement in the saving and investment ratesmainly on account of a turnaround in the publicsector saving rate and improvement in the corporatesector saving rate along with the sustained highsaving rate of households. Under the rule-basedfiscal consolidation programme, public sector savingswitnessed a turnaround underpinned by a steadyincrease in the tax-GDP ratio and steadyimprovement in savings of non-departmental

undertakings. This enabled a narrowing of publicsector saving-investment gap in recent years, therebyreleasing greater resources for the private sector.The significant financial restructuring of the corporatesector and consequent reduction in the overall debt-equity