Dr Yaga Venugopal Reddy took over as the governor of the Reserve Bank of India from Dr Bimal Jalan on September 6, 2003.

Since he assumed charge, India's forex exchange reserves have risen by $31.214 billion (from $87.365 billion as on September 5, 2003, to $118.579 billion for the week ended May 7).

The annual rate of inflation, which averaged 5.4 per cent during April 2003-February 2004 as per the Central Statistical Organisation data, has dipped to 4 per cent in the week ended May 7.

To stem the rising tide of foreign exchange inflows into the banking system the RBI pared the interest rate on non-resident external deposits at regular intervals.

In July, it was capped at 250 basis points above Libor; in September it was cut to 100 basis points above Libor; October it was down to 25 bps above Libor; recently it was linked to Libor/swap rate.

Under Reddy, the cap on external commercial borrowing for corporates was increased from $50 million to $500 million in a financial year. However, the RBI restricted end-use of such capital raised.

In early February 2004 the central bank took the liberalisation process forward permitting resident individuals to invest $25,000 overseas. A number of banks launched foreign currency global products. However, on March 18, the RBI put a halt to these products as it stated in a circular that each bank had to take its permission for launching the products.

Reddy also revised the liquidity adjustment facility (LAF) by introducing a seven-day daily repo auction on March 29, 2004, replacing the practice of conducting one-day repo from Monday through Thursday and a three-day repo on Friday.

In light of the revised LAF scheme the reverse repo rate was revised to six per cent.

The central bank also shifted the settlement mode of government security transactions carried out to the Clearing Corporation India Ltd to DVP III mode. Real-time gross settlement (RTGS) also rolled out with 22 banks transacting business on the system.

On-line tax administration system is also operational with 27 public sector banks and four private sector banks becoming a part of the system.

The RBI, on April 23, reviewed the guideline with regard to payment of dividend by banks.

Banks with minimum capital adequacy of 11 per cent for preceding two completed years and the accounting year for which it proposes to declare dividend and net non-performing assets of less than three per cent would be eligible to declare a dividend.