Stimulus Packages Facing Institutional Constraints

MONEY MARKET REVIEWEconomic & Political Weekly EPW january 24, 200923The review has been drafted by Piyusha D Hukeri, while the supporting tables and graphs have been jointly compiled by V P Prasanth, Rema K Nair and Anita B Shetty.Stimulus Packages Facing Institutional ConstraintsEPW Research FoundationThe massive liquidity injected into the system cannot translate into additional bank credit because of both supply- and demand-side constraints. In the gloomy economic scenario, instead of expanding commercial credit, banks prefer excessive investments in government securities as well as secondary market operations. They also tend to persist with high interest rates despite steep reductions in the Reserve Bank’s benchmark rates. Following fiscal compressions, the capacity of the administration to absorb higher productive expenditures has suffered in recent years. By now the Reserve Bank of India (RBI) and the government have put in place substantial stimulus pack-ages to counter the knock-on effects of theglobal economic crisis in the Indian economy. On the face of it, the packages add up to a massive set of expansionary measures, particularly on the monetary front, but their total impact is likely to be slow and muted and also inegalitarian and distorted because the measures them-selves have been conceived in a conven-tional mould and because their implemen-tation would face serious institutional constraints. In the first place, the massive liquidity injected into the system cannot translate itself into additional bank credit because of both supply- and demand-side constraints. On the supply side, banks are overtly faced with risk aversion such that they prefer excessive investments in gov-ernment securities as well as secondary market operations instead of expanding commercial credit. Evidence suggests that banks also persist with high interest rates despite steep reductions inRBI’s benchmark rates; this high interest bur-den has been an important cause for the setback to industrial investment and out-put growth during the past year or so. On the fiscal side, the biggest stumbling block seems to be the way the shrink-ing of expenditure programmes under the Fiscal Responsi-bility and Budget Management (FRBM) rules have tended to narrow the admini-strative and institu-tional capabilities of the governance system to quickly absorbany higher amounts of develop-mental expenditures.1 Supply- and Demand-Side IssuesThe setback to industrial investment and output has more potently emanated from the fiscal area and area of public invest-ment under which a serious shortfall has occurred. This is so particularly in infra-structural projects, the adverse impact of which on manufacturing investment has been precipitate.Projects Today, an organ-isation tracking the country’s investment projects, has revealed that in the calendar year 2008, 420 projects worth Rs 2,09,000 crore have been shelved; of them 183 projects worth Rs 1,57,926 crore (or 75.6%) have been shelved in the last December quarter alone, reflecting rapid deteriora-tion. The picture looks alarming compared with only 275 projects worth Rs 23,600 crore shelved in 2007. This is confirmed by the Centre for Monitoring the Indian Economy’s (CMIE’s) data onCapex which shows the incidence of a similar shelving or abandoning. Quoting their computation results, theCMIE writes: “The industry witnessed maximum amount of shelving of projects in the first three quarters of 2008-09. During April-December 2008, projects worth Rs 64,170 crore were shelved vis-à-vis Rs 40,226 crore and Rs 57,925 crore in the entire financial years 2006-07 and 2007-08, respectively.” In fact, the shelving has been persistent quarter after quarter. The seriousness of the Table 1: Type of Credit to Industry by Banks(Amount in Rs crore) End-March Short Term* Medium Term Long Term Total Credit Amount Percentage Amount Percentage Amount PercentagetoIndustry Share in Share in Share in (Amount) TotalTotalTotal Credit to Credit to Credit to IndustryIndustry Industry 1995 77,13482.55,4385.810,87411.693,4461996 97,80981.76,6205.515,27312.81,19,7021997 1,09,66679.6 8,136 5.9 19,98814.51,37,7902001 1,70,11474.816,067 7.1 41,34118.22,27,5222002 1,65,828 63.022,314 8.5 74,91028.52,63,0522003 1,79,687 59.522,366 7.4 99,853 33.13,01,9072004 1,89,91757.932,188 9.81,06,08432.33,28,18920052,29,672 52.446,535 10.61,62,29637.04,38,5032006 2,68,13848.258,01810.42,30,20241.45,56,3572007 3,36,95846.171,865 9.83,22,33544.17,31,157* Short-term credit includes cash credit, overdraft, demand loans, packing credit, export trade bills purchased and discounted, export trade bills advancedagainst, advances against export cash incentives and duty drawback claims, inland bills purchased anddiscounted (trade and others), advances against import bills and foreign currency cheques/TCs/ DDs/TTs/MTs purchased.Source:Basic Statistical Returns of Scheduled Commercial Banks in India,various issues,Reserve Bank of India

MONEY MARKET REVIEWjanuary 24, 2009 EPW Economic & Political Weekly24Table 2: Plan Expenditure of the Central Government(in Rs crore)Items Budget Provisional Actuals Actuals up to April-November Year-on-Year EstimatesEstimatesApril-November to Full Fiscal Year Change (%) (%) 2008-092007-082006-072008 2007 2006 2008 2007 20082007Plan expenditure 2,43,386 2,05,558 1,69,860 1,36,130 1,12,619 91,146 55.93 54.79 20.88 23.56On revenue account 2,09,767 1,73,631 1,42,418 1,16,783 92,008 75,545 55.67 52.99 26.93 21.79On capital account 33,619 31,927 27,442 19,347 20,611 15,601 57.55 64.56 -6.13 32.11The percentages for April-November 2008 have been calculated on budget estimates for the fiscal year 2008-09, whereas the percentages for April-November 2007 have been calculated on the provisional estimates for the fiscal year 2007-08.Source:Controller General of Accounts (www.cga.nic.in),Budget at a Glance (2008-09). Table 3: Major Items of Receipts and Expenditures of the Central Government(in Rs crore)Item DevelopmentSocialSectorNon- Expenditure*Development Expenditure*2002-03 1,84,19758,6062,42,749 (7.5) (2.4) (9.8)2006-07 2,55,7181,02,363 3,41,278 (6.2) (2.5) (8.2)2007-08 (RE) 2,83,303 # 1,02,014 4,05,325 (6.0) (2.2) (8.6)2008-09 (BE) 3,60,027 1,17,620 4,07,504 (6.8) (2.2) (7.7)BE: Budget Estimates. RE: Revised Estimates.*: Data on developmental and non-developmental expenditures are inclusive of commercial department.@: Borrowing through dated securities and 364-day Treasury Bills.#: Excludes an amount of Rs 35,531 crore on account of transactions relating to transfer of Reserve Bank’s stake in SBI to the central government.Figures in parentheses are percentages to GDP.Source: RBI,Annual Report2007-08.situation depicted by the CMIE data is shown by the fact that the amount of investment shelved or abandoned has exceeded the level of investment implemented. Such deep distress in industrial invest-ment obviously has a direct effect on bank credit offtake, for after the mid-1990s, corporates have, as a cost-saving device and following improvements in profitabil-ity, reduced their dependence on banks for working capital. Banks have also taken on the role of development finance institu-tions. As shown in Table 1 (p 23), at end-March 1995, as much as 82.5% of banks’ industrial loans were of a short-term nature while medium- and long-term loans were 17.5 %, but by March 2007, short-term loans had dipped to 46.1% and term loans had more than tripled to 54%.A review of the evolving situation sug-gests that the industrial investment scene is facing a serious stalemate. Following the sledgehammer kind of monetary measures, commercial banks had pushed up their prime lending rates (PLRs) to the highest levels of 13.75-14.00% and hence industrial investment suffered because of high inter-est cost. And now the RBI has given signals of rather sharp reductions in interest rates but, on the one hand, the banks are show-ing a lukewarm response to pressures to reduce interest rates, and on the other, there has arisen some demand-side con-straints on investment credit due to paucity of projects under implementation. The clearing of the logjam in industrial investment requires a strong exogenous push. Mere availability of liquidity and even bank credit will not be enough. It is the fiscal stimulus that has to provide a powerful thrust to the programmes of industrial investment in infrastructure and in the basic and capital goods industries generally so as to break the overall stalemate.Even before concerns of the economic slowdown gathered momentum, fiscal policy had faced some strain due to the acceptance of the Sixth Pay Commission recommendations, the loan waiver scheme, and oil and fertiliser bonds. Though these had some expansionary impulses, their impact on investment demand would be indistinct. On the other hand, the two stimulus packages announced on 7 December 2008 and 2 January 2009 have been essentially contra-cyclical measures to arrest the slipping growth. The main areas of focus in the first package have been boost to exports, home loan borrow-ers, small and micro-enterprises, and spe-cial measures for textiles and infrastruc-ture for which the government seeks to increase spending by Rs 20,000 crore, and a 4 percentage point reduction in the cen-tral value added tax (CENVAT) rate. The second package emphasised an easing of constraints on foreign borrowings, increased the limit of foreign institutional investors (FIIs) in rupee-denominated cor-porate bonds from $6 billion to $15 billion and liberalised inflows for the non-bank finance companies (NBFCs). More potently, borrowings by state governments were increased by 0.5% of their respective statedomestic product (SDP) amounting to Rs 30,000 crore for capital expenditure. India Infrastructure Finance Company (IIFC) has been enabled to access in tranches an additional Rs 30,000 crore through tax-free bonds to fund extra projects of about Rs 75,000 crore at com-petitive rates over the next 18 months.It is extremely difficult to gauge as to in what manner and to what extent the over-all capital expenditure of the government in particular and public investment in general would be augmented with these programmes. On the plan side alone, the government has envisaged the provision of an addition of Rs 20,000 crore over and above the budget estimate of Rs 2,43,386 crore for the year 2008-09, to be spent in the next four months. Besides the absence of any clues as to the plan heads or sectors for which the extra amount is earmarked, the stimulus package faces a constraint in that it does not take account of the fact that the actual expenditure during the first eight months lags behind the budget-ed amount (Table 2). In particular, under capital account of the plan head, the actual expenditure has shown a year-on-year absolute fall. When there is such backlog, loading the plan with another Rs 20,000 crore of expenditure, to be spent within the remaining four months of the current year, appears a herculean task. There are seri-ous administrative bottlenecks in pushing for higher expenditures; the stimulus packages do not appear to focus on them. Also, for the central budgetary expendi-ture to make an overall impact on the economy, it has to be raised to at least 7.5% of GDP as it touched once in 2002-05. Under the impulse of the FRBM rules, the centre’s development expenditure as per-centage ofGDP at market prices has been declining. It declined from 7.5% in 2002-03 to 6.0% in 2007-08. The budgeted develop-mentexpenditure for 2008-09 constitutes about 6.8% of GDP (Table 3), and if it has to be raised to 7.5%, the additional expendi-ture should be of the order of around Rs 40,000 crore as against the present stimulus envisaged at Rs 20,000 crore.Thus, it is not just the provision of addi-tional budgetary resources alone that counts in the present crisis but also the administrative and institutional arrange-ments for better delivery of government services at the centre that matter. The same holds true for the states. Their devel-opmental expenditure as percentage of GDP has been gently rising in recent years

MONEY MARKET REVIEWEconomic & Political Weekly EPW january 24, 200925Table 4: Combined Receipts and Disbursements of the Central and the State Governments (in Rs crore)Item 2003-042004-052005-062006-072007-082008-09 AccountsAccountsAccountsAccountsREBETotal Disbursements 7,96,384 8,69,757 9,59,855 11,09,174 13,55,830 14,85,535As % of GDP (28.9) (27.6) (26.8) (26.8) (28.8) (28.0)Developmental 4,17,834 4,45,354 5,09,525 5,88,028 7,36,974 8,34,345As % of GDP (18.8) (19.5) (19.7) (21.2) (22.4) (22.8)RE: Revised Estimates. BE: Budget Estimates.i) Total disbursements/receipts are net of repayments of the central government (including repayments to the NSSF) and state governments.ii) Data pertaining to state governments from 2006-07 relate to budgets of 28 state governments.iii) In case of central government finances for 2007-08 (RE) the figures for non-debt capital receipts include Rs 34,309 crore and development capital outlay include an amount of Rs 35,531 crore on account of transactions relating to transfer of Reserve Bank’s stake in SBI to the central government.Source: RBI,Annual Report2007-08.Table 5: Non-food Bank Credit -Sectoral Deployment(in Rupees crore)Sector/Industry OutstandingYear-on-YearVariations ason31-Aug-0729-Aug-08 29 August 2008 Absolute % Absolute %Non-food gross bank credit 23,14,897 3,58,296 24.4 4,89,183 26.8Agriculture and allied activities 2,62,481 44,360 25 40,913 18.5Industry (small, medium and large) 9,32,313 1,43,614 25.2 2,18,246 30.6Of which: Small 1,30,554 28,126 31.0 11,559 9.7Personal loans 5,52,090 82,953 21.4 81,729 17.4 Creditcards 29,056 5,161 49.5 13,461 86.3Services 5,68,01387,37126.31,48,29535.3 Professional and other services 38,494 8,193 49.7 13,813 56.0 Real Estate Loans 68,196 16,081 52.7 21,595 46.3 Non-banking financial companies 77,039 15,703 49.6 29,683 62.7Memo: Priority sector 7,66,506 1,09,222 20.8 1,32,078 20.8Industry (small, medium and large) 9,32,313 1,43,614 25.2 2,18,246 30.6 Petroleum, coal products and nuclearfuels 62,460 8,069 32.9 29,891 91.8 Rubber, plastic and their products 12,128 1,967 26.8 2,827 30.4 Iron and Steel 88,276 11,733 21.6 22,235 33.7 Vehicles, vehicle parts and transport equipments 33,192 6,641 34.2 7,160 27.5 Construction 31,037 6,286 42.9 10,111 48.3 Infrastructure 2,09,390 37,363 32 55,236 35.81 Data is provisional and relates to select scheduled commercial banks.2 Data also include the figures of Bharat Overseas Bank, which was merged with Indian Overseas Bank on 31 March 2007.Source: RBI,Mid-Term Review, 2008-09, 24 October 2008.Table 6: A Summary of Shortfalls in Agricultural and Weaker Section Loans : By Bank Groups(in Rs crore)1 Agricultural Advances 32,206 Public Sector Banks 19,313 State Bank Group 2,480 Private Sector Banks 10,3132 Weaker Section Loans 45,335 Public Sector Banks 16,995 State Bank Group 3,087 Private Sector Banks 25,3543 Aggregate Shortfall (1+2) 77,541For descriptions, see the text.Source: RBI (2008): Trend and Progress of Banking in India 2007-08.(Table 4 read with Table 2) and now they have been given, under the stimulus pack-age, an additional borrowing programme of Rs 30,000 crore (or 0.6% of GDP) which should augment their spending power. How and in what direction these will be spent is a moot question.As for the expansionary impulses of monetary and credit policies, there is vast scope, even in the midst of some demand-side problems, for the credit-starved enti-ties in agriculture, small-scale industries and amongst small borrowers, which face mind-boggling sets of financial exclusion. Unless a fundamental change is brought about in banks’ behaviour and responses to emergent situations through incentives and disincentives and through moral suasion, the desired impact on the real economy is unlikely to be achieved. First, banks are quick in catching opportunities for increasing interest rates on their lending but very slow in reducing them. When repo rates were raised from 6% to 9% and likewise cash reserve ratio (CRR) was pushed up from 6% to 9% of demand and time liabilities (DTL), banks’ prime lending rates (PLRs) went up almost pari passu from 10.25-10.75% to 13.75-14.00% within a year and half from March 2007 to September 2008; but contrariwise, when both the repo rate and theCRR have been brought down to 5.50%, a reduction of 3.50 percentage points each, banks have reluctantly brought down their PLRs to arangeof12.00-12.50%, that is, just half of the percentage reductions in the repo rate as well as theCRR. Also, in many cases, particularly those of small- and medium-scale bor-rowers, the rates of interest charged are much higher than the banks’PLRs. Secondly, the phenomenon of what has been described as “lazy banking”, with banks’ invest-ment in government and approved secu-rities remaining at around 32% for the scheduled commer-cial banking system as a whole, persists despite the statutory liquidity ratio (SLR) having been slashed to 24% for facilitat-ing higher credit delivery. These cover also huge amounts of treasury operations.Finally, as brought out in these RBI data (Table 5), while banks have very joyfully expanded, during the past year ending August 2008, credit for credit cards (by 86.3%), all services sectors (35.3%), construction (48.3%) or for real estate (46.3%), similar expansions for agriculture and allied activities have been 18.5% and for small-scale industries at 9.7%. A simple question that RBI has to ask itself is as to how its concentration on money market measures and aggressive expansion of liquidity will correct these inequalities in credit distribution and con-sequential distortions. Banks will not do it on their own. Therefore, any liquidity expansion measure that theRBI takes has to be willy-nilly linked to the end use of credit; in particular, more credit has to flow in favour of the informal sectors, which account for the purchasing power of large sections of the population. Other-wise, the counter-cyclical measures that the authorities introduce will not serve the end purpose in view, which is to pro-vide a genuine stimulus to effective demand all along the line. Some telling examples of the implica-tions of neglecting the informal sectors in credit delivery are in order at this stage. In regard to the priority sector targets set at 18% of net bank credit (NBC) for agricul-ture and 10% for weaker sections, the lat-estRBI data have revealed that 15 out of 28 public sector banks and 17 out of 23 pri-vate sector banks have not achieved the 18% target as at the end of March 2008; likewise, as many as 15 public sector banks and all the 23 private sector banks have not achieved the 10% target. Taking these data into account and on the assumption that the banks have taken care of the pos-sible overlap between agricultural and weaker section loans, we have attempted an estimate of the possible shortfalls in agricultural and weaker section loans as depicted in Table 6.These estimated shortfalls of about Rs 77,500 crore (out of which about

7 25

0 5 10 15 20 0 1 2 3 4 5 6 Call Rates Repo Rates – Outside the RBI Call Money Vo ume (Rs 000 Crore) (Right axis)

29/11 2/12 5/12 8/12 11/12 14/12 17/12 20/12 23/12 26/12

51 49 47 45 43 41 39

	2008

MONEY MARKET REVIEWEconomic & Political Weekly EPW january 24, 200927Table 8: Auctions of 91-Day Treasury Bills(Amount in rupees crore) Date of Notified Bids Tendered Bids Accepted Subscription Cut-off Cut-off AmountAuction AmountDevolvedPriceYieldOutstanding No Face Value No Face Value on PDs (Rupees) Rate on the Date (Amount) (Amount)(Amount) (%)ofIssue (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)2007 December 5 2,000.00 61 2,609.00 31 1,500.00 0.00 98.16 7.52 55,848.00 (2) (2,400.00) (2) (2,400.00) [98.17] [7.48] December12 500.00 49 2,481.62 7 500.00 0.00 98.18 7.44 61,284.00 (3) (1,800.00) (3)(1,800.00) [98.18] [7.44] December19 500.00 50 3,179.50 5 500.00 0.00 98.20 7.35 47,548.00 (4) (7,300.00) (4)(7,300.00) [98.20] [7.35] December26 500.00 53 2,510.00 14 500.00 0.00 98.20 7.35 44,498.00 (2) (950.00) (2) (950.00) [98.21] [7.31] 2008 December3 3,000 178 15,189.80 19 3,000.00 0.00 98.38 6.60 68,929.00 (1) (150.00) (1) (150.00) [98.40] [6.52] December10 5,000 177 15,176.55 108 5,000.00 0.00 98.61 5.65 69,368.00 (6) (5,275.00) (6)(5,275.00) [98.64] [5.53] December17 5,000 162 13,297.72 45 5,000.00 0.00 98.66 5.45 69,727.00 (2) (932.37) (2) (932.37) [98.67] [5.41] December24 500 71 5,340.91 7 500.00 0.00 98.76 5.04 69,846.00 (1) (119.00) (1) (119.00) [98.78] [4.95] December31 500 85 6,796.87 8 500.00 0.00 98.84 4.71 69,346.00 (0) (0.00) (0) (0.00) [98.87] [4.58] Figures in parentheses in cols 3 to 6 represent numbers and amounts of non-competitive bids which are not included in the total. Figures in the square brackets under cols 8 and 9 represent weighted average price and respective yield. Table 9: Auctions of 182-Day Treasury Bills(Amount in rupees crore) Date of Notified Bids Tendered Bids Accepted Subscription Cut-off Cut-off AmountAuction AmountDevolvedPriceYieldOutstanding No Face Value No Face Value on PDs (Rupees) Rate on the Date (Amount) (Amount)(Amount) (%)ofIssue2007 December12500.00 52 2,535.30 4 500.00 0.00 96.35 7.60 24,880.00 (1) (125.00) (1) (125.00) [96.35] [7.60] December26500.00 57 2,135.50 22 500.00 0.00 96.35 7.60 22,880.00 (0) (0.00) (0) (0.00) [96.36] [7.58] 2008 December10500.00 59 1,773.70 30 500.00 0.00 97.28 5.61 23,675.00 (0) (0.00) (0) (0.00) [97.52] [5.10] December24500.00 59 2,891.20 7 500.00 0.00 97.52 5.10 22,675.00 (0) (0.00) (0) (0.00) [97.52] [5.10]Figures in the square brackets represent weighted average price and the respective yield. Figures in brackets represent numbers and amounts of non-competitive bids which are not included in the total.Table 10: Auctions of 364-Day Treasury Bills (Amount in rupees crore) Date of Notified Bids Tendered Bids Accepted Subscription Cut-off Cut-off AmountAuction AmountDevolvedPriceYieldOutstanding No Face Value No Face Value on PDs (Rupees) Rate on the Date (Amount) (Amount)(Amount) (%)ofIssue2007 December52,000.00 97 5,711.70 50 2,000.00 0.00 92.86 7.71 60,040 (0) (0.00) (0) (0.00) [92.88] [7.69] December191,000.00 78 4,485.00 17 1,000.00 0.00 92.90 7.66 59,040 (1) (250.00) (1) (250.00) [92.91] [7.65] 2008 December31,000.00 118 6,471.00 4 1,000.00 0.00 94.09 6.30 52,049 (0) (0.00) (0) (0.00) [93.22] [7.29] December311,000.00 74 7,301.00 6 1,000.00 0.00 95.45 4.78 52,049 (0) (0.00) (0) (0.00) [95.46] [4.77]Figures in the square brackets represent weighted average price and the respective yield. Figures in brackets represent numbers and amounts of non-competitive bids which are not included in the total.2.2 Forex MarketAfter a gap of four months, the rupee’s exchange rate vis-à-vis the dollar appreciat-ed over the month in December driven by the return of some stability in equity mar-kets attracting modest foreign investment inflows, a weak US dollar, falling domestic inflation rate, unwinding of non-deliverable forwards (NDF), and the RBI intervention in the market. Yet, the market participants perceived the strength of the rupee to be transient given the rising current account deficit and weakening macroeconomic fun-damentals. Foreign currency inflows in December stood at $6,907 million as against an outflow of $5,077 million in November; the FII’s net investment in equities stood at $433 million as against a net sale position of $644 million in November. Further, the fall-ing inflation rate and the stimulus packages sustained the positive sentiments for the rupee. With the traversing of the contagion of the US financial sector turmoil from the financial to the real sector, it has been accepted that the recession will be deeper and the recovery longer than earlier antici-pated. It has been noticed that, for the first time ever, the recessionary situation exists simultaneously in the US, UK and Japan. As a result, the dollar again began to weaken against major currencies. Even so, the month saw a 3.4% appreciation of the rupee (Graph B, p 29). The total turnover of currency futures on all the exchanges increased to Rs 45,802 crore in December as against Rs 38,571 crore in November with the MCX-SX and National Stock Exchange (NSE) account-ing for the bulk of the volume. The interest rate differentials widened rather sharply despite the cuts in domestic interest rates, as the US Fed too effected a reduction in its benchmark rates. Due to the unwinding of NDF trades and increased arbi-trage activities, the forward premia declined across maturities with the decline in one-month premia exceeding that on three-month and six-month tenures (Graph C, p 29).3 PrimaryMarketsThere was a precipitate fall in yields offered in the primary gilt-edged market. 3.1 Dated Securities In view of the additional central govern-ment expenditure following the approval of the supplementary demand for grants by Parliament, the RBI is to issue dated securities worth Rs 45,000 crore between 1 December 2008 and 31 March 2009. Thus, the earlier scheduled borrowing of Rs 3,000 crore in December was replaced by new borrowings of Rs 10,000 crore through the reissuance of 7.27% 2013 and 7.50% 2034 for notified amounts of Rs6,000 crore and Rs 4,000 crore, respectively, through price-based auction using the multiple price method. Five-year paper was reissued almost after a year at a cut-off yield of 6.24%, while in Octo-ber 2007, the yield was set at 7.74%. The yield on 26-year paper was set at

MONEY MARKET REVIEWjanuary 24, 2009 EPW Economic & Political Weekly28Appendix Table: Secondary Market Operations in Government Papers: NDS and NDS-OM Deals(Amount in rupees crore) Descriptions Weeks Ending December 2008: Yield to Maturity on Actual Trading Total for the Month 26 19 12 5 of December 2008 AMT YTM CY AMT YTM CYAMT YTM CY AMT YTM CYAMT YTM CY1TreasuryBills A91-DayBills 1421.715.174334.775.35 8585.626.05 183.965.97 14526.065.75 B 182-Day Bills 102.56 5.05 479.06 5.25 283.11 5.58 513.44 6.55 1378.17 5.79 C 364-Day Bills 669.52 5.14 1742.61 5.33 420.92 5.41 1790.84 6.52 4623.89 5.77 2 GOIDatedSecurities A Regular(in % Year) 5.48, 2009 475 5.29 5.48 548 5.39 5.48 250 5.73 5.49 1294 6.72 5.51 2567.00 6.08 5.50 6.65,2009 636.08 5.36 6.63 535 5.41 6.63 534.66 5.84 6.63 685.373 6.56 6.65 2391.11 5.82 6.646.96, 2009OMC SB – – – – – – 506.986.9645 8.26 6.9995.00 7.596.977.07 , 2009OMC SB – – – – – – 14.7 7.557.0890.37.597.08105.007.597.087.33 , 2009OMC SB – – – – – – 806.757.32244.9 7.687.34324.907.45 7.33 5.87 , 2010 455 5.31 5.84 1690 5.48 5.85 745 5.71 5.86 917 6.68 5.92 3807.00 5.79 5.87 7.55,2010 25 5.25 7.33 15 5.48 7.35 93 5.78 7.37 470 6.54 7.45 603.00 6.34 7.4311.30 , 2010 – – – 755.7510.42 – – – 187.066.87 10.58 262.06 6.5510.54 11.50 , 2010 50 5.70 10.65 4.5 6.27 10.72 – – – 7 7.20 10.84 61.50 5.91 10.68 12.25 , 2010 – – – 10 5.70 11.19 750 6.23 11.26 80 6.57 11.31 840.00 6.26 11.266.57,2011 30 5.596.44 241 5.69 6.46 1670 6.21 6.52 365 6.60 6.572306.00 6.216.52 9.39,2011 123.42 5.82 8.67 246 5.80 8.67 166 6.37 8.77 689.14 6.75 8.85 1224.56 6.41 8.7810.95 , 2011 2105.70 9.59 – – – – – – 250 6.78 10.01 460.006.299.8211.50 , 2011 1.885.78 10.12 – – – – – – 190 6.7210.31 191.886.7110.3112.00 , 2011 – – – – – – – – – 100 6.6610.55 100.006.6610.55 7.40,2012 33 5.98 7.10 20 6.02 7.10 25 6.54 7.13 11.5 6.81 7.27 89.50 6.25 7.137.44, 2012OMC SB 75 7.407.43 10 7.407.43 – – – – – – 85.00 7.407.43 9.40, 2012 – – – 5 6.06 8.47 120 6.47 8.58 0.95 7.09 8.74 125.95 6.46 8.57 11.03 , 2012 10 6.00 9.51 10.03 6.40 9.62 – – – 20 6.94 9.77 40.03 6.57 9.67 7.27,2013 1892.6 5.78 6.86 2861.59 5.91 6.89 1820.35 6.23 6.98 885.8 7.09 7.22 7460.34 6.10 6.94 7.37,2014 61.5 5.95 6.93 266.3 6.16 6.99 393 6.64 7.14 433.5 6.95 7.24 1154.30 6.61 7.13 7.56,2014 7525.15 5.78 6.95 12947.96 5.90 6.99 6911.58 6.42 7.17 9220.14 6.83 7.30 36604.83 6.21 7.09 11.83 , 2014 – – – 5 6.61 9.45 80 6.88 9.56 – – – 85.00 6.86 9.56 7.28,2015 93.5 5.94 6.84 512.75 6.19 6.93 502.39 6.45 7.03 721 7.05 7.15 1829.64 6.59 7.04 7.59 , 2015 OMC SB 25 7.00 7.37 40 7.19 7.44 35 7.39 7.52 – – – 100.00 7.21 7.45 7.61 , 2015 OMC SB 35 7.00 7.39 – – – 52.5 7.41 7.54 15 8.24 7.85 102.50 7.39 7.53 7.59,2016 201.6 6.22 7.03 145.97 6.16 7.01 197.94 6.66 7.21 576.304 7.09 7.38 1121.81 6.74 7.24 12.30 , 2016 – – – 50 6.53 9.18 45 6.82 9.32 20.4 7.30 9.56 115.40 6.78 9.30 7.46,2017 15.5 6.17 6.87 237.5 6.23 6.90 4 7.08 7.28 17 7.12 7.30 274.00 6.29 6.937.49 , 2017 46.4 6.196.91824.5 6.196.91274.5 6.65 7.11443.857.107.311589.25 6.52 7.067.99,2017 690 6.147.132214.77 6.147.122580.49 6.677.362556.467.097.568041.726.617.34 8.07,2017 263.48 6.18 7.22 954 6.24 7.238317 432.5 6.72 7.45 277.1 7.05 7.60 1927.08 6.46 7.33 5.69,2018 2 6.15 5.89 60.4 6.23 5.92 7.4 6.57 6.07 108.15 7.19 6.35 177.95 6.82 6.19 6.25,2018 71 6.16 6.21 54.3 6.13 6.19 62.9 6.77 6.47 56.25 7.16 6.65 244.45 6.54 6.38 8.24, 2018 25262.8 5.61 6.93 35868.12 5.78 7.01 25714.29 6.53 7.37 24540.019 6.88 7.54 111385.23 6.16 7.19 5.64,2019 39.25 6.24 5.90 19.7 6.42 5.98 12.5 6.88 6.19 18 7.29 6.38 89.45 6.58 6.06 6.05,2019 6.5 6.17 6.11 12.75 6.29 6.16 41.16 6.91 6.46 23.35 7.25 6.63 83.76 6.85 6.43 7.94,2021 1115.7 5.76 6.66 7710.88 5.91 6.74 6500.97 6.63 7.15 7562.808 7.08 7.42 22890.36 6.49 7.08 10.25 , 2021 30 6.27 7.65 48.25 6.55 7.82 3.9 7.15 8.18 – – – 82.15 6.48 7.77 8.15 , 2022 FCI SB 5.33 7.19 7.52 121.69 7.22 7.54 131.44 7.94 8.01 162.06 8.61 8.46 420.52 7.98 8.04 8.20,2022 5 6.38 7.07 207 6.25 6.99 371.06 6.43 7.53 316 7.31 7.63 899.06 6.70 7.44 8.35,2022 74.25 6.22 7.01 520.85 6.31 7.06 511.43 7.02 7.49 470 7.32 7.68 1576.53 6.84 7.38 6.17,2023 46.2 6.24 6.21 92.4 6.45 6.33 27.35 7.13 6.75 15.45 7.43 6.94 181.40 6.58 6.42 6.30,2023 4.45 6.21 6.25 47.75 6.22 6.25 5.25 7.04 6.75 54 7.40 6.97 111.45 6.83 6.62 8.20 , 2023 OMC SB 5600 6.31 6.95 5285 6.75 7.22 4830 7.23 7.54 5070 7.60 7.79 20785.00 6.95 7.36 8.30 , 2023 FERT BONDS – – – 115 7.28 7.60 60 7.84 7.98 5 8.18 8.22 180.00 7.49 7.74 8.30 , 2023 FERT SB 185.42 7.26 7.59 589.15 7.22 7.56 573.79 7.79 7.95 755.12 8.52 8.45 2103.48 7.85 7.998.30 , 2023 – – – – – – 957.97 8.07 – – – 95.00 7.97 8.07 8.03 , 2024 FCI SB 62.1 7.26 7.49 166.3 7.12 7.40 4.49 8.07 8.05 191.02 8.86 8.64 423.91 7.94 7.988.03 , 2024 – – – – – – 100 7.507.65 – – – 100.007.507.65 7.95 , 2025 OMC SB – – – 50 7.18 7.41 56 7.46 7.60 11.935 8.05 8.02 117.94 7.40 7.56 7.95 , 2026 FERT SB 453.58 7.30 7.48 860.27 7.31 7.48 1620.71 7.90 7.91 1100.052 8.47 8.34 4034.61 7.86 7.89 7.95 , 2026 FERT BONDS 20 7.17 7.39 190 7.22 7.42 260 7.84 7.87 – – – 470.00 7.56 7.67 8.24,2027 170 6.77 7.15 2326.07 6.67 7.08 619 7.09 7.38 1213 7.40 7.61 4328.07 6.94 7.27 6.01,2028 59.5 6.53 6.36 42.67 6.77 6.54 44.71 7.19 6.82 5.3 7.60 7.08 152.18 6.83 6.57 7.95,2032 5714 6.67 6.91 15187.04 6.70 6.93 7468 7.15 7.29 8486.2 7.44 7.52 36855.24 6.96 7.13 8.28,2032 680 6.71 7.00 1322.9 6.74 7.02 1175.2 7.18 7.37 3415.5 7.46 7.60 6593.60 7.19 7.38 7.50,2034 739.71 6.79 6.91 1750.65 6.85 6.96 196.2 7.01 7.09 101.6 7.72 7.69 2788.16 6.88 6.98 7.40,2035 5.6 6.83 6.92 27.69 6.93 7.00 183.48 7.26 7.29 128.68 7.49 7.48 345.45 7.31 7.33 8.33,2036 1720.04 6.78 6.99 5147.39 6.77 6.98 3899.4 7.22 7.36 3421.91 7.54 7.6314188.74 7.08 7.24 Sub-total 55172.97 5.936.94102686.156.146.9872715.39 6.737.3578311.747.127.51308886.256.497.19BRBI’sOMO:Sales 7.00 –– – ––– – –134––141.00 –– Purchase 2115.00 – – 2895.00 – – 2505.00 – – 1781 – – 9296.00 – – Sub-total 2122.00 – – 2895.00 – – 2505.00 – – 1915.00 – – 9437.00 – – (A+B) 57294.97 5.93 6.94 105581.15 6.14 6.98 75220.39 6.73 7.35 80226.74 7.12 7.51 318323.25 6.49 7.193 MarketRepo 76188.01 92635.95 87549.72 64034.61320408.294 State Govt Securities 1010.55 6.34 6.75 1473.82 6.77 7.36 1034.10 7.00 7.17 726.05 7.44 7.80 4244.52 6.84 7.24 Grand total (1 to 4) 136687.32 206247.36 173093.86 147475.64 663504.18 (-) Means no trading. YTM = Yield to maturity in percentage per annum. CY = Current yield in per cent per annum. SGL = (RBI’s) Subsidiary General Ledger. OMO = Open Market Operations. OMC SB= Oil Marketing Companies SpecialBonds. FCI SB = Food Corporation of India Special Bonds. NDS = Negotiated Dealing System. OM = Order Matching Segment. UTI SB = UTI Special Bonds. FERT SB : Fertilizer Companies Special Bonds. Securities with small size transactions (Rs 80 crore or less) have been dropped from the above list but included in the respective total.(1) Yields are weighted yields, weighted by the amounts of each transaction. (2) Current yield has not been worked out for treasury bills.(3) For Floating Rate Bonds (FRB’s) Current yields are based on the latest half-year yield determined in the auction.

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Weighted Averages of Call Rates (Right axis) 6 month 1 month