shaktikanta das : financial inclusion – past, present and future keynote address by mr shaktikanta das, governor of the reserve bank of india, at the 21st fixed income money market and derivatives association of india - primary dealers association of india ( fimmda - pdai ) annual conference, 31 august 2021. * * * it is my pleasure to be part of the fimmda - pdai conference today. i take this opportunity to place on record the reserve bank ’ s deep appreciation of the key role played by fimmda and pdai in the development of financial markets in india. both organizations have played a significant role in improving the depth and liquidity of interest rate markets and in supporting primary issuance by the government. introduction 2. during may last year, in one of my statements, i had noted that covid - 19 has crippled the global economy, and that once again, central banks have to answer the call to the frontline in defence of the economy. it has been more than a year since. while there are signs of recovery, we are not yet out of the woods. 3. the sudden shock delivered by the pandemic called for swift and decisive policy responses. central banks across the globe responded by lowering interest rates, expanding their balance sheets through large - scale purchase of government securities ( g - sec ) and other assets and injecting vast amounts of liquidity into the financial system. many central banks also implemented measures targeting specific market segments that were witnessing heightened stress. these measures were, in many cases, complemented by regulatory relaxations ( lower capital and liquidity requirements ) aimed at supporting credit flow from banks and other financial intermediaries and at stabilizing the financial system and restoring confidence in financial markets. 4. the reserve bank too responded swiftly and undertook several conventional, unconventional and innovative measures in the realms of monetary policy, liquidity support and regulation. the reserve bank, like most debt managers around the globe, was confronted with a highly expanded borrowing programme of the government. through various measures, the reserve bank completed the borrowing programme in a non - disruptive manner and also created congenial conditions for other segments of the financial market such as the corporate bond market. the stabilisation of credit spreads across the rating ladder resulted in issuances of corporate bonds to the tune of ₹7. 72 lakh crore in 2020 – 21. in my address today, i propose to focus on the g - sec market which is

monetary policy is that flexible inflation targeting – applied in the right way and in particular using all the information about financial conditions that is relevant for the forecast of inflation and resource utilisation at any horizon – remains the best - practice monetary policy before, during, and after the financial crisis. a conclusion that should be drawn from the crisis is that neither price stability nor interestrate policy is sufficient to achieve financial stability. instead, a separate financial - stability policy is needed. in particular, monetary policy and financial - stability policy need to be conceptually distinguished, since they have different objectives and different appropriate instruments, even in cases where the central bank has responsibility for both. 1 financial stability as an objective of monetary policy makes little sense, but it does makes sense as an objective of the central bank, if the central bank has the instruments required to fulfil this responsibility. let me elaborate on these issues. for a more detailed discussion of these issues, see svensson ( 2010, section 5. 2 ). bis central bankers ’ speeches monetary policy after the crisis is there any reason to fundamentally modify the framework of flexible inflation targeting given the experience of the financial crisis? i think not. flexible inflation targeting has worked and continues to work well – before, during and after the crisis. flexible inflation targeting implies that the central bank aims at stabilizing both inflation around an inflation target and resource utilization around a normal level. this implies choosing a policy - rate path such that the corresponding forecasts of inflation and resource utilisation best stabilise inflation and resource utilisation. if the central bank uses all relevant information in constructing these forecasts, including the impact of changes in financial conditions on inflation and resource utilisation at any horizon, monetary policy will automatically respond in the best possible way to changing financial conditions ( woodford 2007, 2010a ). one lesson from the financial crisis is that financial conditions may in times of crisis have a strong and deteriorating effect on the transmission mechanism, making standard interest - rate policy less effective. this motivates more research on how to incorporate financial conditions and financial intermediation into the standard models of the transmission mechanism used by central banks. much progress has already been made in understanding these effects ( see adrian and shin 2010a, gertler and kiyotaki 2010 and woodford 2010a ). the relation between monetary policy and financial - stability policy as mentioned, an important conclusion from the financial crisis is that neither price stability nor interest - rate policy are