They are not suggesting a credit crunch but are concerned that it could happen, and they say it isn't yet clear how banking terms and conditions will evolve. There are a wide range of estimates trying to map this expected credit tightening into policy rate hikes. As of today, it isn't clear to me what the effect on the economy will be.
Mr. Reddy reports on the dilemmas of exchange rate management in India Inaugural Address by the Deputy Governor of the Reserve Bank of India, Dr. Y.V. Reddy, at the XIth National Assembly Forex Association of India held in Goa on 15/8/97.