WHAT'S NEW. UK voted to become the first country to leave EU.

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1 International Developments UK voted to become the first country to leave EU. In prepared testimony before the Senate Banking Committee, Fed Chair Janet Yellen outlined how the Fed was thrown off course within weeks of raising rates last December by a slowdown in domestic growth and international events. She said slow productivity growth is a serious concern. Central banks across the world pledged to take action as needed to avert any breakdown in financial-market liquidity. Bank of Japan Governor Haruhiko Kuroda was the first to pledge readiness to provide sufficient liquidity, including using cross-currency swap arrangements, to ensure stability on Brexit. Bank of England said it had undertaken extensive contingency planning and was working closely with the Treasury, other domestic authorities and overseas central banks and stood ready to infuse $345 billion through its existing facilities. Mario Draghi said the ECB was ready to respond to any Brexit turmoil. The IMF warned that Britain's decision to leave the European Union has created "significant uncertainty" that will have repercussions not only for the UK and Europe, but also for the global economy. Standard & Poor's and Fitch downgraded the United Kingdom's credit rating from "AAA" to "AA" and from "AA+" to "AA" respectively citing the Brexit referendum. Standard and Poor's cut the credit rating for the European Union (EU) by one notch stating that the bloc had grown more uncertain after Brexit. Bank of Korea cut the seven-day repurchase rate to 1.25% citing growing risks to the economy including slowing global trade and the government's push to restructure indebted companies. Federal Reserve Chair Janet Yellen indicated that the US economy is improving but remains defined by so many uncertainties that it was unclear when the Fed should resume raising interest rates. A Federal Reserve interest-rate increase would be good for China because it would signal demand is rising and the U.S. economy is improving, People's Bank of China Deputy Governor Yi Gang said. 19

2 International Developments ECB revised up growth forecasts for 2016 to 1.60% stating downside risks to the outlook included subdued prospects in EMs and balance-sheet adjustments. Inflation forecasts were unchanged. Dallas Fed President Robert reiterated the view that the Fed should raise rates soon because the economy is getting close to full employment and inflation is starting to rise. As per the Fed's latest Beige Book, the U.S. economy expanded at a modest pace across most of the country since mid-april, causing the labor market to tighten as employers continued adding jobs and nudging wages higher. US Q GDP growth was revised up to 1.1% from earlier estimate of 0.8%. Japan's GDP expanded an annualized 1.90% in the first quarter versus 1.70% reported initially. First quarter GDP growth of the Eurozone was revised upwards to 1.70%. U.K. GDP grew 0.4% in the first quarter of 2016, lower than 0.7% growth seen in the fourth quarter of Australia's GDP rose 3.10% in the first quarter underpinned by an export bonanza. Canada's GDP rose an annualized 2.40% in the first quarter as falling investment and oil production curbed export and consumption gains. China recorded a trade surplus of $50 billion in May. Japan recorded a trade deficit of $389 million in May. Japan recorded a current account surplus of $17.7 billion in April. China forex reserves fell by $27.93 billion to $3.192 trillion in May under pressure from a rising dollar. Deflationary pressures eased in China as producer prices fell 2.80% in May, the least since late Consumer prices rose 2.0% y-o-y, compared with a 2.30% increase in April. Eurozone inflation edged up 0.10% in June from prior year, offsetting a 0.10% fall in May. Global FDI increased 38% in 2015 from the year before, driven by corporate transactions. 20

3 World Bank slashed its 2016 global growth forecast to 2.40% from 2.90% estimated in January due to stubbornly low commodity prices, sluggish demand in AEs, weak trade and diminishing capital flows. The global economy is slipping into a self-fulfilling low-growth trap where ultra-loose monetary policy risks doing more harm than good, the OECD warned forecasting world GDP growth at 3% this year. IMF cut its growth forecast for the U.S. economy to 2.20% in 2016 making a case for the Fed to proceed on a "very gradual" path in raising its benchmark rate. According to the China Academy of Social Sciences, China's economy will grow at about 6.60% this year, and will need to be underpinned by policy support in the second half to counter downward pressures. Indian Economy India registered a fiscal deficit of `91,660 crore during May 2016, an increase of 13.02% over the fiscal deficit of `81,101 crore in May The fiscal deficit during April-May 2016 accounted for 42.90% of the budgeted estimates of `5,33,904 crore for India's exports declined 0.79% in May 2016 to $22.17 billion from $22.35 billion in May Imports fell 13.16% to $28.44 billion from $32.75 billion. The trade deficit for April-May 2016 was estimated at US$5.39 billion which was 65.67% lower than the deficit of US$15.71 billion during April-May The Index of Industrial Production (IIP) contracted 0.80% in April 2016 against 3.0% growth in April The eight core industries - coal, electricity, crude oil, natural gas, steel, cement, fertilizer and refinery products having 38% weightage in IIP registered 2.8% (y-o-y) in May 2016 in comparison to 4.4% (y-o-y) growth in May Provisional annual inflation rates based on all India general CPI Rural, Urban and Combined for May 2016 on point to point basis are 6.45%, 4.89% and 5.76% (5.52%, 4.41% and 5.01% in May 2015). Inflation rates (final) for Rural, Urban and Combined for April 2016 are 6.17%, 4.68% and 5.47% respectively. 21

4 Indian Economy The annual rate of inflation, based on monthly WPI, stood at 0.79% (provisional) for May 2016 as compared to 0.34% (provisional) for April 2016 and -2.20% during May The annual rate of inflation based on final index was higher at -0.45% for March 2016 as compared to -0.85% reported earlier. The year-on-year inflation measured by monthly CPI-IW stood at 6.59% for May 2016 as compared to 5.86% for April 2016 and 5.74% during May2015. Point to point rate of inflation based on the CPI-AL and CPI-RL increased from 5.34% and 5.56% in April 2016 to 6.04% and 6.13% in May 2016 respectively. India's holding of US Treasury Securities at the end of April 2016 stood at $ billion vis-à-vis $ billion at the end of March FDI into India increased by 16.50% to $2.46 billion in March. For , the inflows grew by 29% to $40 billion as against $30.93 billion in Indian companies raised a record `4.92 lakh crore in FY16 through private placement of corporate bonds to meet business needs, a surge of 6% from FY15. India's external debt stood at $485.6 billion at the end of March 2016, recording an increase of $10.6 billion year-on-year, primarily on account of a rise in outstanding NRI deposits. The Government left the interest rates for small savings schemes unchanged. The government released the draft model of the national goods and services tax (GST) law for debate. The government extended the timeline for issuance of UDAY bonds by State Governments. The World Bank dropped the use of developing nation tag for India in its specialised reports and instead classified it as a "lower-middle-income" economy in South Asia. The Indian economy will more than double to $5 trillion in a matter of few years as the government steps on its reforms agenda to accelerate growth, Finance Minister ArunJaitley said. Indian economy is well poised to touch 8% growth rate in FY17 on the back of a good monsoon, Economic Affairs Secretary Shaktikanta Das said. 22

5 Indian Economy Performance of the agriculture sector will help India post 7.70% growth in FY17, as per a Ficci survey. India needs to activate stalled engines including private investment and rural demand to sustain 7.60% growth rate in the coming years, the World Bank said. OECD expects India to grow 7.50% this year as well as in next year. Recovery in the Indian economy is likely to continue and the GDP growth though uneven is expected at 7.80% in FY17, propped largely by strong consumption and public expenditure as per a DBS report. Finance Minister Arun Jaitley said India is well prepared to deal with the short and medium term consequences of Brexit. Morgan Stanley said that Brexit is likely to have an adverse impact on India's growth with GDP expected to decline by 60bps in a high stress scenario within the next two year. India's economy will be among the least impacted in Asia by the U.K.'s vote to exit the European Union given its relatively low exposure to trade, according to Morgan Stanley. According to Crisil Research report, Brexit is unlikely to derail India's growth story or its inflation trajectory, but CAD could worsen a tad to 1.30% of its GDP. Moody's Investors Service said that India's decision to relax FDI in sectors including defence, aviation, and retail is a positive development for its sovereign ratings. Rating agency Moody's said that the government's plans to consolidate public sector banks could create risks in the current environment where stressed assets across banks are high. 23

6 Reserve Bank of India: (Source: The rate of interest on the Floating Rate Bonds, 2020 (FRB, 2020) applicable for the half year June 21, 2016 to December 20, 2016 shall be 6.94% p.a. The ceiling for the outstanding balance under the MSS for the fiscal year has been fixed at `30,000 crore. RBI notified June 13, 2016 as the date from which the Sovereign Gold Bonds (issued on November 30, 2015) held in dematerialised form shall be eligible for trading on the stock exchanges. RBI announced that it was maintaining a close vigil on Brexit developments, was ready to take all necessary steps, including liquidity support, to ensure orderly conditions in financial markets. RBI placed on its website draft guidelines for computing exposure for counterparty credit risk (CCR) arising from derivative transactions and draft guidelines on capital requirements for bank exposures to central counterparties (CCPs) for comments and feedback. RBI permitted resident exporters and importers of goods and services to write (sell) standalone plain vanilla European call and put option contracts against their contracted exposure. RBI notified regulatory relaxations for startups. RBI reviewed the reporting requirements under Basel III capital regulations. RBI notified the format for reporting of information on investment in commercial papers and unhedged foreign currency exposures of the borrowers to credit information companies. RBI notified on implementation of Indian Accounting Standards (Ind AS). RBI notified the scheme for sustainable structuring of stressed assets. RBI extended the dispensation of amortising the shortfall on sale of NPAs to SCs/RCs up to March 31, 2017 subject to conditions. RBI advised banks to temporarily suspend operations in 'ACU Euro' with effect from July 01, 2016 as it is under review. Accordingly, all eligible current account transactions including trade transactions in 'Euro' are permitted to be settled outside the ACU mechanism until further notice. RBI directed banks to immediately put in place a cyber-security policy. RBI decided that ECB proposals received above a certain threshold limit (refixed from time to time) be placed before the Empowered Committee. 24

7 Reserve Bank of India: (Source: RBI issued comprehensive master direction on financial statements by All India Financial Institutions. RBI issued Small Finance Bank license to Equitas Holdings. RBI set applicable average base rate for Pricing of credit by NBFC-MFIs for the quarter beginning July 01, RBI simplified and rationalized the process of registration of new NBFCs. RBI notified instructions for NBFCs on refinancing of project loans. RBI notified the format of Statutory Auditors' Certificate (SAC) by NBFCs. RBI notified on credit information reporting in respect of Self Help Group (SHG) members. RBI published Payment and Settlement Systems in India: Vision RBI released the Financial Stability Report for June RBI released summary of the Electronic Consultation with the Technical Advisory Committee (TAC) on Monetary Policy held electronically during May 24-30, RBI launched the Survey of Foreign Liabilities and Assets of Mutual Fund Companies: RBI launched the June 2016 Round of its consumer confidence survey and inflation expectations survey of households. RBI released the data on sectoral deployment of bank credit for April RBI released quarterly statistics on deposits and credit of Scheduled Commercial Banks for March RBI released the first edition of its statistical publication titled Handbook of Statistics on Indian States RBI released the Data on International Banking Statistics of India on its website. RBI released data on ECB/FCCB for May RBI released data on developments in India's balance of payments during fourth quarter of RBI released data on sources of variation in foreign exchange reserves in India during

8 Reserve Bank of India: (Source: RBI released data on overseas direct investment for May RBI released data on India's international trade in services for April RBI released the results of survey of professional forecasters on macroeconomic indicators. CCIL Trades on the NDS-OM trading system recorded all-time high volumes of `1,64, crore on July 13, CROMS, the Order Matching Repo trading platform recorded its alltime daily highest volumes of `94,745 crore on July 22, CBLO registered its all-time daily highest volumes of `1,12, crore and also trades of 1,113 on July 1, CCIL's USD/INR Segment recorded the all-time high monthly volume of USD billion during June The ASTROID (the Anonymous IRS Dealing System) recorded the all-time high of `4,125 crore on June 29,