will be able to read about us and our banking policies in our own telugu language and other regions in their own mother tongue on a multi - lingual website. we will also make this information available by way of brochures, pamphlets, films, etc. we in the rbi work as a family and rbi attracts best talents as an equal opportunity employer to perform the challenging tasks. we have offices in most state capitals and a board of directors representing expertise in diversified fields. our family journal has won several awards. we constantly strive to keep up the morale and motivation spirits high amongst ourselves at all levels of people working with us to meet the challenges of serving the common person with all care and commitment. i have said several things about the reserve bank so far but i must also say something about our relationship with our state of andhra pradesh. the rbi has a tradition of excellent relations with the government of andhra pradesh and all the chief ministers. as governor, i have called on shri chandrababu naidu garu when he was chief minister and now i call on dr y. s. rajasekhara reddy garu from time to time. both reserve bank and our state benefit from such meetings at several official levels. let me place before you some recent developments in andhra pradesh about which reserve bank is particularly pleased. first, as the banker to the state government, we are happy that in the last three years the state never took temporary advances from us to meet any day - to - day deficits between receipts and expenditure. this shows a prudent fiscal management. second, we find that the financial position of the state is improving and hence, the government's borrowings for developmental purposes could be conducted by the reserve bank at relatively lower cost. financial markets continue to show increasing confidence in the state, year after year, particularly all through the new millennium. third, andhra pradesh is the first state in the country to sign a memorandum of understanding ( mou ) with reserve bank to consolidate and improve the urban co - operative banking system and the new scheme is working in an excellent manner in a spirit of co - operation and professionalism. fourth, the state has provided strong financial support to rural co - operatives already and is again the first state in the country among the few who have so far signed mou with the reserve bank to consolidate and develop rural co - operative credit system. this scheme will revive and revitalise the rural co - operatives with substantial financial support from the government of india

committee ’ s discussions during the backend of 2006 and into this year ( chart 1 ). with both having been strong for a while, some asked whether this marked some kind of change in the reaction function, implying a greater stress on nominal variables. given the near identity of deposits and bank lending, money and credit are often used almost inseparably, even interchangeably, with wider measures of non - bank credit looked at only when assessing the health of corporate and household sector balance sheets. but in some circumstances one can do better to approach things the other way round, starting with general credit conditions, examining the interactions of non - bank and bank lending, and then broad money as a ( partial ) counterpart to m4l. my remarks today will follow that structure, which will provide a framework for some observations about the current tightening in credit conditions, as well as about the preceding expansion. “ the transmission mechanism of monetary policy ”, a paper by the monetary policy committee at the bank of england, april 1999 and harrison r., k. nikolov, m. quinn, g. ramsay, a scott and r. thomas, “ the bank of england quarterly model ”, bank of england 2005. the bank ’ s wider “ suite of models ” does include richer asset price channels. credit credit is, of course, vital to any economy, enabling households and firms to make choices about whether to bring forward or defer spending from income. there are conditions in which it would play no active role, passively reflecting cyclical fluctuations in output, employment and inflation. in a world of more or less complete transparency between borrowers and lenders, very low transactions costs, and very low risk aversion, access to credit would not be rationed ; and ex ante yields on financial assets, including loans and bonds, would not embody risk premia. so if households and firms wanted to bring forward spending in the face of shocks to the economy, they would be able to do so restricted only by their need to remain solvent. but nobody believes that that is a description of the real world in which households and companies manage their affairs. both are, to a greater or lesser degree, rationed in their access to credit, given that borrowers know a great deal more about their conditions and prospects than do risk - averse lenders, and that lenders face obstacles in ensuring that borrowers honour their contracts. 2 the availability, price and terms of credit – whether un