is likely to have much less impact. wholesale funding guarantee has now expired. term auction facility relates largely to the acceptance of residential - mortgagebacked securities. with the termination of these special programmes, the reserve bank does not feel it needs quite as much risk - based capital on its own balance sheet, and consequently has returned $ 45 million to the crown. 4. the world is on two different recovery paths a feature of this recession is that we are seeing quite different troughs and recoveries in two regions of the world, as shown in the figure. in the “ east ”, defined as emerging market economies and commodity exporters, the cycle has been more shallow, and a very strong “ v - shaped ” recovery is underway. of most relevance to us, china and australia are both in this group, but also other asian economies, and oil exporters and commodity exporters from latin america, southern africa, south - east asia and australasia. in the “ west ”, an icelandic - style cloud of despondency still settles over the old northern economies with large financial sectors and high production costs. in the us, eurozone, and particularly uk and japan the cyclical trough was historically deep, and the recovery looks slow and fragile. the difference in these two zones shows up clearly in the figure. the eastern region lost 2. 5 per cent growth through the crisis, but is now back on to a pre - crisis growth trend, and has clearly passed pre - crisis income levels. the western region lost a lot more income through the period – around 4. 5 per cent and is struggling to resume its ( much lower ) precrisis growth trend, and has not yet made up for lost income. the economic recovery is involving some degree of global rebalancing. the huge current account deficits of the west and surpluses of the east have been partly reduced as a result of a rebalancing of consumption and savings. the broader economic and geopolitical implications of rebalancing are only now starting to be seen in the g20 and in bilateral negotiations. 5. our own recovery is externally - driven new zealand has been considerably helped during this recovery period by a strong china and emerging market growth in consumption, a strong minerals - driven australia, and some other market and climatic factors. we saw a commodities boom in the pre - crisis year, but few people expected to see it repeated immediately post - crisis. most would be aware that world dairy

the reserve bank's refinance rates ( april 1997 ). the subsequent introduction of fixed rate repo ( december 1997 ) helped in creating an informal corridor in the money market, with the repo rate as floor and the bank rate as the ceiling. the use of these two instruments in conjunction with omo enabled rbi to keep the call rate within this informal corridor for most of the time. subsequently, the introduction of liquidity adjustment facility ( laf ) from june 2000 enabled the modulation of liquidity conditions on a daily basis and also short term interest rates through the laf window, while signaling the stance of policy through changes in the bank rate. gains from reform it has been possible to reduce the statutory preemption on the banking system. the cash reserve ratio ( crr ), which was the primary instrument of monetary policy, has been brought down from 15. 0 per cent in march 1991 to 5. 5 per cent by december 2001. the medium - term objective is to bring down the crr to its statutory minimum level of 3. 0 per cent within a short period of time. similarly, statutory liquidity ratio ( slr ) has been brought down from 38. 5 per cent to its statutory minimum of 25. 0 per cent by october 1997. it has also been possible to deregulate and rationalise the interest rate structure. except savings deposit, all other interest rate restrictions have been done away with and banks have been given full operational flexibility in determining their deposit and lending rates barring some restrictions on export credit and small borrowings. the commercial lending rates for prime borrowers of banks has fallen from a high of about 16. 5 per cent in march 1991 to around 10. 0 per cent by december 2001. in terms of monetary policy signals, while the bank rate was dormant and seldom used in 1991, it has been made operationally effective from 1997 and continues to remain the principal signaling instrument. the bank rate has been brought down from 12. 0 per cent in april 1997 to 6. 5 per cent by december 2001. it is envisaged that the laf rate would operate around the bank rate, with a flexible corridor, as more active operative instrument for day - to - day liquidity management and steering shortterm interest rates. a contrasting feature in the positions between 1991 and 2001 is india ’ s foreign exchange reserves. the monetary and credit policy for 1991 - 92 was formulated against the background of a difficult foreign exchange situation. over the period,