In addressing its concerns on overheating in certain sensitive segments of the economy (such as real estate and exposure to capital markets and certain retail loans), the central bank has taken necessary steps to prune the banking sector's exposure to these sectors by increasing the provisioning requirement from 1% to 2%, therefore significantly impacting public and private banks with a high composition of retail assets, capital markets as well as realty exposures. No action on the bank rate and the reverse repo rate, which have been maintained at 6%, also indicates that the RBI policy remains growth-conducive. However, going forward, we expect rates to head higher as liquidity management would continue to remain a dominant concern – the S&P upgrade in India's sovereign rating only exacerbates the situation as higher foreign capital markets and debt flows will be further augmented under this improved investment grade rating for India.