Summary of measures taken by RBI in 1997-98 during South East Asian financial Crisis.

RBI Policy Chronology Summary 1997-98

Period / date	RBI policy measure		Macroeconomic backdrop
Easing bias prior to South East Asian Financial Crisis
October 1997	Bank rate was reduced to 9% from 10%  RBI promised to reduce CRR to 8% from 10% in eight tranches between October 1997 and March 1998 (estimated liquidity infusion: INR96bn)  Interest rate to banks on CRR balances was raised from 3.5% to 4%  Interest rate on pre-shipment export credit was reduced to 12% from 13%. Post shipment rupee credit interest rate reduced to 11% or less from 13% (both for loans less than 90days)		RBI had started monetary easing to revitalise growth following a phase of high inflation, heavy monetary tightening and a slump in growth during the mid-1990s
Stringent tightening following the South East Asian Financial Crisis
November 1997		Interest rate on post-shipment INR export credit (3-6m) was raised to 15% from 13%  CRR cuts planned through eight tranches was deferred  RBI announced scheme of the fixed repo rate starting at 4.5%
December 1997		CRR was raised by 50bps to 10% and Incremental CRR of 10% on NRE and NRNR was withdrawn  Repo rate was raised in three stages during December alone to 7% from 4.5%  Banks were required to charge a 20% interest rate on overdue export bills  An interest rate surcharge of 15% on the lending rate imposed on bank credit for imports  Interest rate on post-shipment INR export credit for over 90 days was reduced to 13% from 15%
January 1998		Bank rate was raised to 11% from 9%  CRR was raised to 10.5% from 10%  Repo rate was raised to 9% from 7%  Export credit refinance limit was halved to 50% of the increase in outstanding export credit  Liquidity support to primary dealers via reverse repos was made discretionary  Interest rate surcharge on bank credits for imports was raised to 30% from 15%  General refinance to commercial banks was reduced to 0.25% of the fortnightly average outstanding aggregate deposits in 1996-97.
Reversal of the RBI’s stringent policy stance
March– August 1998	March: Repo rate reduced to 8% from 9%. Bank rate was reduced to 10.5% from 11%. CRR was reduced to 10% from 10.5%  April: Bank rate was reduced to 9% from 10.5% in two stages; repo rate was reduced to 6% from 8% in two stages  Export credit refinance limit was restored to 100% (versus 50% in the recent past).  Interest rate on pre-shipment export credit (less than six months) was reduced to 11% from 12%  June 1998: Repo rate was reduced to 5% from 6%  August: Resurgent India Bonds (RIBs) were floated overseas targeting the Indian diaspora by the State Bank of India – raises USD4.2bn in three currencies (USD, GBP, DM). This turned out to be a meaningful accretion to the nation’s forex reserve pool and eventually offered good support to the INR trajectory		Reversal of monetary policy measures announced to contain effects of South East Asian currency crisis. Stability had returned to currency market and liquidity conditions eased

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