"The government's announcement (of hike in petroleum products) involves some pass-through and some burden sharing. It is a very, very positive step in the right direction," he said.

"Our overall assessment is that we must recognise that there are three extraordinary factors in the global situation that have converged at the same time. These relate to food, financial markets and fuel," Reddy said.

Asked whether the oil bonds would be given Statutory Liquidity Ratio (SLR) status, the RBI chief said: "We in RBI would like to maintain the integrity of the SLR regime."

Pointing out that the uncertainty in the global oil scenario was not entirely unexpected, he said: "Actually, increase in oil prices has been more than what was anticipated, though we have factored in the possibility of high volatility in oil prices."

Replying to a question on global developments, he said "Currently, the global situation is quite extraordinary. As mentioned in the monetary review policy, we in the RBI are carefully monitoring the global and domestic developments with regard to growth, inflation and financial markets."