rupee coins net of the increase in the central government ’ s cash balances. in other words, the reserve bank ’ s holdings of 91 - day treasury bills that forms a part of budget deficit is also a subset of the monetised deficit. however, it may be noted that while the constituents of the budget deficit are measured at face value, those of the net reserve bank credit to the central government are measured at book value. this valuation difference is, however, negligible particularly for 91 - day treasury bills. the correlation between the budget deficit and the monetised deficit grows weaker at times of easy liquidity such as during the current financial year as absorption by the market of government securities including 91 - day treasury bills has gone up substantially. the purchase of government securities by non - rbi entities reduces the monetised deficit in two ways : ( i ) directly by reducing the devolvement on the reserve bank of 91 - day treasury bills and dated securities auctions as well as through the sale of dated securities including repos and ii ) indirectly, as the market off - take of tap treasury bills and fresh government securities improves the central government ’ s cash balances and reduces the central government ’ s recourse to ad hoc treasury bills. 16. the rbi ’ s support to primary issues of central government securities reflects only its support in the primary offers, and net rbi credit to the government could be very different due to other factors. let me illustrate this with some figures. in 1993 - 94, the rbi ’ s support to government was rs. 7, 014 crore, but net rbi credit was only rs. 260 crores. in 1996 - 97, till february 14th, rbi ’ s support was rs. 12, 099 crore, but, net rbi credit was only rs. 7, 837 crore. the monetised deficit is one source of the money supply and is not the only factor affecting the money supply. 17. it is sometimes argued that the real instrument for fiscal prudence should be a statutory ceiling on debt. true, our constitution enables parliamentary legislation relating to a ceiling on debt. the ministry of finance is due to bring out a discussion paper on this. let me not pre - empt its content. but, clearly the new system has merits of its own and will co - exist more effectively with a ceiling on debt. it has merits in itself since it seeks to limit the extent of the rbi ’ s support. technically,

language, appropriate and proportional. therefore, we have increased our focus on providing suitable training and skills to our officers so that the regulations can be written in simple language and there is better clarity on the regulatory intent. bringing customer conduct into focus in whole scheme of things, the'customer'should and must remain the centre. the two primary objectives of regulation viz. ensuring financial stability and protecting customer interest leads to two broad categories of regulations – prudential regulations and conduct regulations. prudential regulation builds foundation for financial stability, while conduct regulation lays the ethical foundation for maintaining customer trust, together help in safeguarding the integrity of our financial system. accordingly, our endeavour has been to inculcate responsible conduct on the part of the regulated entities. we have asked banks to design suitability and performance requirements for financial products and financial services keeping in mind the interests of its customers. this includes board level oversight arrangements that a bank must put in place in order to meet these objectives. as we further strengthen our approach towards addressing the concerns in the area of conduct based regulations, the guiding philosophy would be to set certain minimum regulatory expectations, with the option for entities to adopt higher standards depending upon their size, proportionality and customer focus. the ultimate message is that the regulated entities should treat all customers - big or small, urban or rural, educated or less educated, in a transparent and ethical manner. principle based vs rule based regulations 5 / 7 bis - central bankers'speeches there is an ongoing debate of whether a principle based approach is preferable or whether a rule - based approach to regulations is the better option. at different points in time, one approach has influenced the policymakers more than the other. the benefit of rules - based regulations is that it provides certainty and firm guidance on what regulated entities are required to do, and from the regulator's point of view, the measurable and explainable regulatory targets and responsibilities that can be easily monitored and enforced. but in a prescriptive approach to regulation, the rules might end up becoming more important than the intended outcome for which they were designed, leading to a culture of " box ticking " compliance. in contrast, principle - based regulation is more like a compass, providing regulated entities with a general direction, without specifying the precise route to be taken. the principles are crafted to be suitable for a wide array of situations and emphasize on desired outcomes. they grant regulated entities the flexibility to adapt to evolving circumstances and to innovate ; however, it