shri vepa kamesam : roll - out strategy for rtgs implementation inaugural address by shri vepa kamesam, deputy governor of the reserve bank of india, at a meeting with cmds of banks, mumbai, 21 july 2003. * * * i welcome you all to this meeting. i am glad to share with you that the implementation of the rtgs project has progressed significantly and is now critically poised. even when i am speaking to you, the demonstration of the demo rtgs system to a group of bank officials is in progress in our bankers ’ training college. the rtgs system is scheduled to be delivered by the end of october, 2003, followed by installation, testing and commencement of parallel run before the year - end. therefore, we have to now prepare ourselves for the roll - out of the rtgs system. incidentally, my colleagues have been regularly meeting with your nodal officers for the project and other officials to assess your preparedness for participation in the rtgs system. friends, there will be a single rtgs system for the country and all of us have to make co - ordinated and concerted efforts to ensure that the entire nation optimally benefits from the introduction of the rtgs system. i take this opportunity to update you on the recent developments in the payment systems area. one of the primary objectives of every central bank is to put in a place a modern, robust, secure and integrated payment and settlement system to enable the common man to make payments to anyone he likes in the most efficient and cost effective manner. the ultimate beneficiary of the payment system has to be the ordinary bank customer. in fact, our vision has been “ anyone can make payments to whomsoever one likes, whenever one likes, in whatever type of currency one likes, at the cost of a few cents per transaction. there are no settlement delays or mountains of paperwork and value is received instantaneously. there are no distinctions in costs or delays between a domestic and a foreign currency transaction. interest is computed real - time rather than on a “ settlement day ”, a relic from the ancient times, when accounting was done manually. finally, privacy and security are guaranteed. ” the rtgs system will facilitate large value inter - bank payment and settlement in real time online mode on a transaction by transaction basis. it will enhance systemic efficiency and minimise the existing settlement risks. in fact, the rtgs system the world over has come to be regarded as the sin

value of 4½ % for the annual growth of the broad monetary aggregate m3. current m3 growth is analysed and interpreted in relation to this reference value. under normal conditions, substantial or prolonged deviations of monetary growth from the reference value would signal risks to price stability over the medium term. for the euro area, this relationship is empirically well - founded. the available econometric evidence suggests the existence of a stable relationship between m3, the euro area price level and a small number of other area - wide macroeconomic variables. moreover, there is good evidence with regard to leading indicator properties of m3 for future price developments. while there can be no doubt about the relevance of monetary growth for inflation in the medium term, short - term changes in the stock of money may be influenced by factors unrelated to future spending and future inflation. thus, the eurosystem does not react mechanically to short - term deviations of monetary growth from the reference value. instead, monetary developments are analysed very carefully in order to extract their information content for future inflation. if this analysis clearly were to suggest that monetary developments indicate a threat to future price stability, monetary policy would respond in a manner appropriate to counter the risk. although the monetary data contain information vital to informed monetary policymaking, on their own they will not normally constitute a complete summary of all the economic information required to set an appropriate monetary policy for the maintenance of price stability. thus, in parallel with the analysis of monetary growth in relation to the reference value, a broadly based assessment of the outlook for price developments and the risks to price stability in the euro area play a major role in the eurosystem ’ s strategy. this assessment is made on the basis of a wide range of variables which have leading indicator properties for future price developments, including, inter alia, wages, unit labour costs, bond prices, the yield curve, fiscal policy indicators, various measures of real activity, price and cost indices. let me take this opportunity to stress that the governing council of the ecb considers the euro exchange rate an important indicator within the second pillar of the eurosystem ’ s strategy. it is closely monitored and influences monetary policy decisions, as it can have implications for the outlook for price stability in the euro area. changes in the exchange rate can influence the outlook for price developments both directly, through their impact on import prices, and indirectly, through their effects on trade. against this background, the prolonged depreciation of the exchange rate of