Amid the discussion on when the government would withdraw the fiscal stimulus, the Reserve Bank of India (RBI) on Tuesday said it has started exiting the accommodative monetary policy.

The Reserve Bank, which today reviewed its monetary policy, increased statutory liquidity ratio (SLR), which requires banks to keep a portion of their deposits in government bonds, gold etc, by one percentage points to 25 points among other steps.

It, however, left other key rates unchanged.

“The following measures (increase in SLR and other steps) constitute the first phase of exit,” RBI Governor D. Subbarao said while announcing the monetary policy review.

Besides increasing SLR, the RBI also cut refinance facility for export credit to the pre-crisis level of 15 per cent of outstanding export credit from 50 per cent.

The central bank also discontinued special repo facility for commercial banks for the purpose of funding to mutual funds, NBFCs and housing finance corporations, initiated in the wake of the collapse of U.S. financial services icon, Lehman Brothers.

When asked about continuance of fiscal stimulus measures, Finance Minister Pranab Mukherjee said separately, “As I mentioned that until the economy is on a firm recovery path, it will continue.”

The RBI Governor said, “While reversing of conventional measures is not considered appropriate for now, many of the unconventional measures can be reversed immediately.”

Conventional measures, like the short term lending, borrowing rates (repo and reverse repo), Cash Reserve Ratio, were all kept intact at their present levels in today’s policy review.

In fact, the RBI’s move to include Collateralised Borrowing and Lending Obligations (CBLO), a money market instrument, in calculation of CRR would also tighten money supply a bit, analysts said.

“It may be appropriate to sequence the exit in a calibrated way so that while the recovery process is not hampered, inflation expectations remain anchored. The exit process can begin with the closure of some special liquidity support measures,” the Governor said.

Former Prime Minister’s Economic Advisory Council Chairman, Suresh Tendulkar, also said that the RBI has signalled withdrawal of easy monetary stance.

“Statutory Liquidity Ratio increase is just a beginning of withdrawal of liquidity from the system,” he said.

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