continuous flow of credit to the economy. 50. the ratio of non - performing loans to total loans of commercial banks has increased to 5. 3 per cent in june 2020, from 4. 5 per cent in march 2020. the bank has established a task force on banking resilience, comprising the mauritius bankers association limited and bankers, to closely monitor the impact of covid - 19 on the banking system. 51. the bank continues to deploy its financial stability surveillance toolkit to assess any potential risks to the financial system. 52. the bank stands ready to introduce additional regulatory measures to contain the effects of a more pronounced setback in key sectors of the mauritian economy on the banking system. 53. you will recall i had appealed to the public to use electronic payments channels back in march 2020. indeed, electronic payment transactions — in particular mobile payments — have recorded significant increase since. 54. i am pleased to announce that all banks offering domestic retail payments have successfully on - boarded the instant payment system ( ips ) in august 2020. there is growing interest from fintech and psp companies to use the ips, as it provides an enabling platform for innovation in the payments domain. 55. as mauritius moves to a digital era, i continue to encourage the public at large to make greater use of electronic payment channels. mpc decision 56. i now come to the decision of the mpc today. 57. the mpc discussed the global economic context and the performance of the domestic 4 / 5 bis central bankers'speeches economy. 58. the domestic economy is still facing the disruptive effects of the covid - 19 pandemic. the contraction in major trading partners ’ output would result in weaker demand for our exports. 59. consequently, bank staff has revised its projection for real gdp growth for 2020, from – 12. 5 per cent to – 13. 0 per cent. for 2021, real gdp is projected to grow at about 7. 5 per cent. 60. domestic inflation continues to remain low and stable, as demand - side and supply - side pressures remain at bay. in the absence of further exogenous shocks, bank staff is projecting headline inflation at about 2. 5 per cent in both 2020 and 2021. 61. considering the international and domestic economic outlook, the mpc views that the current monetary policy stance of maintaining the krr at 1. 85 per cent per annum is appropriate. 62. the mpc will continue to monitor the economic situation closely and

2 months. let me say a word about exchange rate, a subject of much interest right now. as a matter of policy, the bank allows the free play of market forces to determine the exchange value of the rupee. our intervention in the domestic foreign exchange market is not aimed at offsetting market forces, or at targeting any specific exchange rate. our only objective is to smooth out unwarranted volatility in the rupee exchange rate and improve the functioning of the market. in a brief interview that i gave to the “ business standard ” newspaper in india last week, i said that even if our economy was suffering from a deluge of foreign exchange inflows, most of the foreign exchange operations were confined to the spot market. this is why we want to encourage the development of a vibrant futures and forward market that will help in creating an active foreign exchange market and introduce newer instruments for exporters and entrepreneurs to hedge and trade in the financial services sector. as regards the issue of risk management, it is a correct practice these days to use derivatives to hedge against unwanted volatilities. derivatives can bring substantial benefits to the commercial community, in facilitating hedging and business planning. such instruments enable financial institutions to offer a progressively wider range of services and achieve greater efficiency in the intermediation process. unfortunately, this is one area where mauritius is lagging behind. the market for derivatives has not picked up significantly compared to other emerging market economies. i strongly believe that the domestic financial market is mature enough to engage in derivatives trading under proper regulation. the bank is now considering the necessary measures that need to be implemented to stimulate the development of this market. i know that. in many quarters, derivatives have a murky reputation. we do not believe that derivatives necessarily lead to market manipulation, which would be bad for a small market like ours. rather, we see derivatives as enhancing the efficiency of financial markets and this is why we are determined to put in place in the near future the necessary building blocks for its rapid development. we are conscious that derivatives involve multiple extra policy responsibilities for the bank. derivatives and derivatives - trading have the potential to bring disaster if not properly supervised. therefore one of the areas that the bank will concentrate upon therefore is to ensure that risks are properly identified, and managed, and that downside risks which might threaten systemic stability are avoided. as we move into these new pastures designed to deepen the financial market and broaden the range of financial products and instruments