•The markets don’t seem to have appreciated the measures taken by the RBI in the last few days. What do you say about this?

I have no view on that. I believe that the market has its own dynamics and all the Asian markets are down. Policies are not created with the markets in view. We formulate policies keeping certain objectives in mind.

•The RBI has taken several steps to improve liquidity. When can we see the impact?

The impact is already there. The LAF window has moved from the repo mode to the reverse repo mode. The injection through the LAF widow was Rs 90,000 crore. Yesterday, the absorption through the reverse repo window was Rs 37,000 crore and this is an indication of liquidity easing. If you want to go beyond that then we can see that call rates have come down. The yields on 10 year G-secs have come down... there is sufficient liquidity in the system now.

•Short-term measures have been taken. When will banks reduce their rates?

Reducing interest rates is a business decision for banks and we respect that. We signal a rate direction and we believe that they will take it up from there.

•Is there a reversal of tight monetary policy? Can we now assume that easy money conditions will prevail?

Yes, there is a reversal in a mathematical sense and I want to say that the context in which tightening was done was the context of rising inflation. Now inflation has started to ease, although it is very high, and there are additions concerns rising from the global financial crisis, especially liquidity and we tried to balance this concern.

... contd.