The summary of Credit policy by Y V Reddy:

“The RBI could not have turned a blind eye to the rising inflation. Equally, it couldn’t have made moves that would permanently spook the markets and harden interest rates to a point where they put a brake on 7% plus GDP growth. So, Dr Reddy has chosen the soft, signalling option. By increasing the reverse repo rate (at which banks park their excess short term funds with the RBI) from 4.75% to 5%, he has indicated that the financial sector ought to be prepared for a possible hardening of interest rates. Equally, by leaving the bank rate unchanged at 6% and limiting the spread between the repo and the reverse repo rates at 1 percentage point, Dr Reddy has signalled that he doesn’t want to affect growth, and won’t apply a tight squeeze yet. Basically, what he has said goes thus: “Listen guys. I am just adjusting your pajamas a teeny-weeny bit. If inflationary pressures ease off, so will I. But if these intensify then expect me to start tightening the draw strings”.
    So that there aren’t too many skittish reactions, the RBI has also thrown in a fair amount of goodies. Indian companies can now invest up to 200% of their net worth in overseas JVs and subsidiaries — which is a doubling of the limit. Moreover, listed companies have now been allowed in repo transactions. While this may, at the margin, move some corporates away from liquid or money market mutual funds, it will create a wider and more diverse repo market, which is a good thing. Trading in gilts have been made easier. And banks have been allowed to approve proposals from their corporate customers for commodity hedging in international exchanges. "