Oct. 28, 2009 (The Hindu Business Line) --

“Pleasantly surprised,” is how Mr Abheek Barua, Chief Economist, HDFC Bank (NYSE:HDB) , chose to put it.

The macro-economic environment and liquidity conditions in the run-up to the last policy had warranted calibrated unlocking of the liquidity reservoir.

The SLR was one of the policy instruments employed for the same.

By bringing it back to the level where it originally belonged, the RBI has ensured that the availability of enhanced investments in Government securities.

This would also lead the prevailing high liquidity level to correct itself to some extent.

The reminder to the Government to downsize its borrowing programme is a ritualistic one, Mr Barua told Business Line, adding that not much needs to be read between the lines in this regard.

Mr Indranil Sengupta, Chief India Economist and Senior Director - Economics and Research, DSP Merrill Lynch, was of the view that the revised SLR was about the only feature that accorded any novelty value to the policy statement.

The restriction on lending to the real estate sector through provision of additional risk weightage was very much along expected lines, Mr Sengupta said.

The RBI has raised the requirement for banks to keep the money aside while lending to this sector from 0.40 per cent to one per cent.

Its decision not to give in to the demand for raising the held-to-maturity (HTM) limit for banks’ debt holdings, which could increase demand for bonds, too was along expected lines.

Raised HTM limit would allow banks to put more of these holdings in an account free on mark-to-market requirements.