central banking in the 21st century : changing paradigm first himalaya shumsher memorial lecture by shri shaktikanta das, governor, reserve bank of india nepal rashtra bank, kathmandu, nepal, september 24, 2024 i am delighted to have been invited by the nepal rashtra bank ( nrb ) to deliver the inaugural himalaya shumsher memorial lecture. i deem it as a privilege. i place on record my appreciation of the nepal rashtra bank for initiating this lecture series in honour of shri himalaya shumsher rana, the first governor of nrb from 1956 to 1961. he contributed immensely to the development of nepalese monetary and financial systems. his efforts laid the foundation for many of nepal's key financial institutions and contributed significantly to the country's economic development. nepal and india have enjoyed a long standing relationship that goes back into history. it is not just a relationship between the two countries, it is also a close people to people relationship. the nepal rashtra bank and the reserve bank of india also share a close relationship based on mutual co - operation. 2. central banks have traditionally functioned as the guardians of macroeconomic and financial stability. in recent years, central banks were at the forefront protecting their economies and financial systems from the onslaught of multiple global shocks. they were put to ultimate test in this extraordinary period of global turbulence and uncertainties. they had to change gear to revive their covid19 pandemic - ravaged economies to waging an all - out war against inflation in quick succession. many standard central banking theories and practices were debated ; and while some survived, others had to adapt to the new realities. as we still transit through this challenging period which is now dominated by geopolitical conflicts and global geoeconomic fragmentation, it would be appropriate to examine how central banking has evolved over the years, draw lessons from the past crises, and prepare for the challenges that lie ahead in the 21st century. today, therefore, i have chosen to speak on “ central banking in the 21st century : changing paradigm ”. 3. i have structured my talk in the following manner. first, i propose to speak on the established paradigm of central banking at the turn of the last century. thereafter, i would like to describe how this paradigm has evolved, learning from the crisis experiences of the 21st century, followed by brief remarks on the reserve bank ’ s approach to policymaking that has helped the indian economy emerge stronger in the last few years. finally

15 ) ; • issuances are concentrated in the aa or above rating, largely by public sector entities and financial institutions • a majority of the issuances are concentrated in the 2 – 5 year tenor ; • limited / narrow investor base. investment mandates of institutional investors such as insurance companies, pension funds and provident funds do not permit large investment in corporate bonds ; • reissuance of bonds has not picked up ; • lack of functional trading platform with ccp facility like nds - om ( as available in government securities market ) impedes the growth of secondary market ; • market for credit risk protection instruments like cds has not yet developed ; • non - standardized stamp duties on corporate bonds across various states affects issuances. way forward 9. activating the corporate bond market will require a number of regulatory measures to address both the macro issues as well as the market micro - structure issues. while creating an efficient market infrastructure will create conditions for issuers and investors, the structural issues can be addressed over the longer term as the market evolves and the financial system gets more integrated with international markets. it would be convenient to look at the set of issues in a comprehensive manner. i would like to classify some of the possible measures in the “ 7i ” framework which i had talked about in one of my earlier speeches. bis central bankers ’ speeches issuer reissuance of bonds 10. corporates may be encouraged to re - issue existing bonds under the same isin code. this will augment market liquidity and potentially reduce the cost of borrowings. though sebi has recently allowed reissuances by the corporates, there has not been any reissue of bonds by any corporate. in order to encourage reissuances, there may be a need for some incentives in the form reduced documentation formalities, less issuance fees, etc. issuance of municipal bonds 11. an active corporate bond market would enable market for municipal bonds issued by the urban local bodies ( ulbs ). the potential for issuing municipal bonds assumes importance in the context of the proposal to set up 100 smart cities. however, the size of the municipal bond market in india is rather limited and is distributed over a few strong municipalities of ahmadabad, nasik, nagpur, etc. the possible reasons could be overlapping jurisdiction on municipal bodies leading to plethora of rules ; perceived lack of specialized project management support in ulbs ; non - transparent budgeting and accounting systems in many of the ulbs