WHAT'S NEW. International Developments

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International Developments Bank of England's MPC voted for a package of measures designed to provide additional support to growth and to achieve a sustainable return of inflation to the 2% target comprising of: a 25 bps cut in Bank Rate to 0.25%; a new Term Funding Scheme to reinforce the pass-through of the cut in Bank Rate; the purchase of up to 10 billion of UK corporate bonds; and an expansion of the asset purchase scheme for UK government bonds of 60 billion, taking the total stock of these asset purchases to 435 billion. The last three elements will be financed by the issuance of central bank reserves. Bank of England cut its growth forecast for 2017 to 0.80% and 1.80% in 2018. BoE Governor Mark Carney declared that all elements of the stimulus can be taken further, including another rate cut. Reserve Bank of Australia lowered the cash rate by 25 bps to 1.50%, effective August 3, 2016 in a bid to counter disinflation and support the labor market. Reserve Bank of Australia said the outlook for the currency and China are key uncertainties to its growth and inflation forecasts, which were otherwise little changed. Reserve Bank of New Zealand reduced the Official Cash Rate by 25 bps to 2.0% and highlighted the need for further policy easing as it struggles to head off the dangers of deflation. Fed Chair Janet Yellen said the case for raising interest rates had strengthened but did not provide the timeline. Fed vice-chairman Stanley Fischer said an increase was a possibility in September. Federal Reserve Vice Chairman Stanley Fischer signaled that a 2016 rate hike is still under consideration as the economy is already close to meeting the Fed's goals and growth will gain steam. The People's Bank of China said it will use multiple tools to keep liquidity at reasonably ample levels and maintain reasonable credit growth in the second half. The People's Bank of China said frequent reductions to lenders' reserve requirements would add too much liquidity to the financial system, lead to yuan depreciation expectations fuelling speculative currency trading and also spur declines in borrowing costs. 27

International Developments The People's Bank of China said it plans to push the yuan's global use by seeking more cooperation with other countries and improving the infrastructure needed to support wider use of the currency. The People's Bank of China gave more signals about its evolving monetary policy stance, flagging continued use of liquidity tools rather than further cuts to interest rates or reserve ratios. Bank of Korea holding the seven-day repurchase rate at 1.25% deferred further policy action until a clearer picture of the economy's path emerged. BOE Chief Economist Andy Haldane said monetary policy can't fully insulate Britain from the long-term effects of Brexit. The minutes of the latest FOMC meeting show that officials encouraged by a rebound in job growth believed that near-term risks to the US economy had subsided and that an interest rate increase could soon be warranted. Federal Reserve Bank of San Francisco President John Williams called for monetary and fiscal policy makers to rethink the way they operate. Japanese Prime Minister Shinzo Abe's cabinet approved $132 billion in fiscal measures even as the Bank of Japan fought market speculation that it is preparing to put the brakes on monetary stimulus for the world's thirdbiggest economy. Real GDP in the US increased at an annual rate of 1.10% in the second quarter of 2016 as per the second estimate vs 1.20% in the advance estimate. In the first quarter, real GDP increased 0.80%. Japan's economy grew an annualized 0.20% in the April-June quarter while posting flat growth on quarterly basis. Eurozone GDP growth slowed to 0.30% in the second quarter. UK GDP growth was confirmed at 0.60% in the second quarter from 0.40% in the first quarter. China's foreign-exchange reserves declined marginally by $4.10 billion to $3.20 trillion in July. China's trade surplus widened to $52.30 billion in July amid sluggish exports reflecting tepid global demand, while deteriorating imports raise concern domestic conditions may be weakening anew. The US Labor Department said its producer price index for final demand dropped 0.40% in July. 28

International Developments China's CPI rose 1.80% in July while producer prices fell 1.70% from a year earlier. Consumer-price growth in the U.K. increased to 0.60% in July from 0.50% in June. The Financial Stability Board warned that the world's biggest banks still cannot be wound down in an orderly manner. Indian Economy The Central Government, in consultation with RBI, fixed the inflation target for the period beginning from August 5, 2016 and ending on the March 31, 2021, as 4% with the upper tolerance level at 6% and the lower tolerance level at 2%. The Government also notified the statutory and institutionalized framework for monetary policy. The Rajya Sabha voted to approve the constitutional amendment that will help usher in the GST. The Finance Ministry said that all efforts are being made to roll out GST from April 1, 2017, and allayed fears that it will have an impact on inflation even if the rate is kept at 20%. GDP at constant (2011-12) prices in Q1 of FY17 is estimated at `29.17 lakh crore ( `27.24 lakh crore in Q1 of FY16), showing a growth rate of 7.10%. Quarterly GVA at Basic Price at constant (2011-2012) prices for Q1 of FY17 is estimated at `27.38 lakh crore showing a growth rate of 7.30%, as against `25.51 lakh crore in Q1 of FY16. India registered a fiscal deficit of `67,164 crore during July 2016, a decline of 31.75% over the fiscal deficit of `98,408 crore in July 2015. The fiscal deficit during April-July 2016 accounted for 73.70% of the budgeted estimates of `5,33,904 crore for 2016-17. India's exports declined 6.84% in July 2016 to $21.69 billion from $23.28 billion in July 2015. Imports fell 19.03% to $29.45 billion from $36.37 billion. The overall trade deficit for April-July 2016 was estimated at US$10.80 billion which was 63.38% lower than the deficit of US$29.49 billion during April-July 2015. The Index of Industrial Production (IIP) grew 2.10% in June 2016 against 4.20% growth in June 2015. The IIP grew 0.60% in April-June 2016 as against growth of 3.30% in April-June 2015. The eight core industries with a combined weight of 37.90% in the Index of 29

Indian Economy Industrial Production (IIP) grew 3.20% in July 2016 as compared to growth of 1.30% in July 2015. Cumulative growth for April-July 2016 was 4.90%, as against 2.20% growth in April-July 2015. Provisional annual inflation rates based on all India general CPI Rural, Urban and Combined for July 2016 on point to point basis are 6.66%, 5.39% and 6.07% (6.29%, 5.26% and 5.77% in July 2015). Inflation rates (final) for Rural, Urban and Combined for June 2016 are 4.35%, 2.94% and 3.69% respectively. The annual rate of inflation, based on monthly WPI, stood at 3.55% (provisional) for July 2016 as compared to 1.62% (provisional) for May 2016 and -4.0% during July 2015. The annual rate of inflation based on final index was higher at 1.24% for May 2016 as compared to 0.79% reported earlier. The year-on-year inflation measured by monthly CPI-IW stood at 6.46% for July 2016 as compared to 6.13% for June 2016 and 4.37% during July 2015. Point to point rate of inflation based on the CPI-AL and CPI-RL increased from 5.98% and 6.07% in June 2016 to 6.69% and 6.53% in July 2016 respectively. India's holding of US Treasury Securities at the end of June 2016 stood at $117.20 billion vis-à-vis $118.0 billion at the end of May 2016. Direct tax collections upto July 2016 indicate net revenue collections of `1.59 lakh crore, a growth of 24.01% over corresponding period in FY16 and 18.82% of the Budget Estimates of direct taxes in FY17. Indirect tax collections upto July 2016 indicate net revenue collections of `2,71,719crore a growth of 29.90% over the corresponding period and 34.90% of the Budget Estimates of indirect taxes. India's mutual fund sector hit a milestone of `15.18 lakh crore in assets under management in July. S&P said supportive monetary and fiscal policies can help India achieve 8% growth in the next three fiscals, but if reforms do not get further momentum then its economic "outperformance" could be short-lived. As per S&P Indian state-run banks will need `2.50 lakh crore capital infusion over the next three years to meet Basel-III requirements. Moody's Investors Service retained India's growth forecast at 7.50% for 2016 but revised upwards estimates for China to 6.60% citing strong fiscal and monetary support. Moody's Investors Service said continued reforms to enhance business 30

Indian Economy environment and moderate inflation will help India achieve robust growth but cautioned that rising contingent liability risks in the banking sector could affect its credit quality. It expects GDP growth around 7.50% for next two years. Moody's stated that RBI should continue with its policies and communication showing commitment to achieve its inflation target. As per Care Ratings, the banking sector's NPAs almost doubled to 8.50% in the first quarter driven by surging bad assets of state-run lenders. Goldman Sachs maintained its GDP growth forecast of 7.90% for this fiscal. Reserve Bank of India: (Source: http://rbi.org.in) Dr. Urjit R Patel has been appointed as the new Governor of RBI for a period of three years with effect from September 4, 2016. The 559th meeting of the Central Board of the RBI was held on Thursday, August 11, 2016 at Mumbai. The Board approved the transfer of surplus of the RBI for the year 2015-16 amounting to Government of India. `658.76 billion to the RBI announced measures for development of fixed income and currency markets. RBI identified State Bank of India (SBI) and ICICI Bank as Domestic Systemically Important Banks (D-SIBs) in 2016 and retained their bucketing structure as in 2015. Sovereign Gold Bonds (issued on February 8, 2016 and March 29, 2016, respectively) shall be eligible for trading on the stock exchanges from August 29, 2016 (Monday). RBI notified the operational guidelines for the Sovereign Gold Bonds 2016-17 Series II. The issue price of the Sovereign Gold Bond 2016-17 Series II has been fixed at `3,150/- (Rupees Three Thousand One Hundred Fifty only) per gram of gold. The Sovereign Gold Bonds issued on August 05, 2016 shall be eligible for trading from Thursday, September 01, 2016 on the stock exchanges. RBI notified the fixed timings for broadcasting of auction results and allotment of GoI dated securities and T-Bills. RBI relaxed the eligibility conditions and other terms of participation in the market repo transactions in government securities market. 31

RBI clarified on the prudential norms for off-balance sheet exposures of banks for restructuring of derivative contracts. RBI permitted banks to engage the services of its retired officials for assisting in internal audit. RBI permitted brokers registered with SEBI and authorised as market makers in corporate bond market to undertake repo/reverse repo contracts in corporate debt securities. RBI notified the guidelines on enhancing credit supply for large borrowers through market mechanism. RBI relaxed the aggregate exposure limit of banks regarding Partial Credit Enhancement (PCE) to corporate bonds. RBI placed the draft circular on customer protection limiting liability of customers in unauthorisedelectronic banking transactions for feedback. RBI notified on the modification in procedure for handling dishonour of cheques. RBI sought comments on the draft large exposures framework. RBI notified on priority sector lending status for factoring transactions. RBI published the report of the working group on corporate bond market in India. RBI released guidelines for 'on tap' licensing of universal banks in the private sector. RBI notified the Master Circular on collection of direct taxes OLTAS. RBI issued Master Directions for exemptions from the provisions of RBI Act, 1934. RBI reviewed the prudential norms for risk weights for exposures to corporates, AFCs and NBFC-IFCs. RBI issued Master Directions for Non-Banking Financial Companies. RBI constituted a Committee on household finance. RBI notified on capacity building in banks and AIFIs. RBI notified the timeline for implementation of Indian Accounting Standards (Ind AS) by All India Financial Institutions. RBI notified the revised reporting format for Financial Literacy Centres. RBI extended the deadline for Bharat Bill Payment Operating Units (BBPOU) applicants to December 31st. 32

Reserve Bank of India: (Source: http://rbi.org.in) RBI launched the 10th pilot round of quarterly services and infrastructure outlook survey for Q2 FY17. RBI launched the 75th round of the quarterly Industrial Outlook Survey for reference period Q2 FY17. RBI launched the September 2016 round of inflation expectations survey of households. RBI launched the September 2016 round of Consumer Confidence Survey (CCS). RBI released the summary of the electronic consultation with the Technical Advisory Committee on Monetary Policy: August 2016. RBI released its Annual Report for 2015-16. RBI released 'Quarterly BSR-1: Outstanding Credit of Scheduled Commercial Banks for March 2016'. RBI released the results of forward looking Surveys. RBI released data related to results of the 2015-16 round of the survey of foreign liabilities and assets of the mutual fund companies. RBI released data on India's international trade in services for June 2016. RBI released data on overseas direct investment for July 2016. RBI released data on sectoral deployment of bank credit for July 2016. RBI released data on ECB/FCCB for July 2016. CCIL On September 8, 2016, CCIL conducted the 11th cycle of the Portfolio Compression exercise in the OTC Interest Rate Swaps market. The exercise achieved a compression of 84% and a marketwide reduction of notional outstanding of `2,18,958.79 crore. FX-SWAP Dealing System registered its highest daily volume of USD 730.00 million on September 6, 2016. Trades on the ASTROID (the Anonymous IRS Dealing System) recorded their highest level of `6,700 crore on September 14, 2016. CBLO volumes recorded their all-time high volumes of `1,16,232.60 crore on September 15, 2016. 33