mr reddy discusses monetary policy in india speech by y. v. reddy, deputy governor of the reserve bank of india, at the fourth securities industry summit, in mumbai, india on 26 may 1999. chairman and friends, i thank the organisers for inviting me to deliver the inaugural address at the fourth annual securities industry summit. although the discussions in this summit will specifically veer around the securities market, monetary policy strongly influences the working of the financial markets. as a central banker, i will, therefore, speak on monetary policy making, which i trust will provide some perspectives to the deliberations at the summit. objectives in india, monetary policy has always emphasised the objectives of price stability and growth. what this, in effect, has meant in practical policy setting is, formulating a balance between the two objectives depending on the evolving situation but within the broad context of keeping the inflation rate within a reasonable bound. apart from these two important goals, there has been a conscious attempt on the part of the reserve bank in recent years to maintain orderly conditions in the foreign exchange market, and to curb destabilising and self - fulfilling speculative activities. this has assumed strategic importance for the sustainability of the external sector in the face of growing cross border capital flows into the economy. with the increasing order of domestic and international financial integration, exchange rate expectations do impact on the domestic stance of monetary policy and hence the significance of inflation. in the transitional phase, however, given the exchange market imperfections, the exchange rate objective may occasionally predominate due to emphasis on avoidance of undue volatility. in fact, sometimes, as was the case recently, it could be the most dominant reason for short - term monetary policy adjustments. in a broader framework, the objectives of monetary policy in india continue to be price stability and growth. these are pursued inter alia through ensuring credit availability, with stability in the external value of the rupee as well as overall financial stability, all being reflective of pursuit of the overall objectives. the relative emphasis among the objectives is governed by the prevailing circumstances. targets the conduct of monetary policy in india has traditionally proceeded with the help of an intermediate target, which the central bank could influence directly and which bears a reasonably close relationship with the ultimate objectives. the particular mode of central bank intervention is the operating instrument. macro - economic variables, which post useful information about the objectives of monetary policy, although they may not in themselves be amenable to central bank targeting, are ‘

attention at present. these are not just limited to the growth of fintechs but traverse across the spectrum of the financial services sector. a few areas of the focus going forward would include issues of how to go about harnessing the benefits of technology, ensuring good customer service and conduct, enabling a strong governance and compliance framework within the regulated entities, reinforcing and fine - tuning existing prudential regulations and contain the risks from procyclicality in lending. harnessing the benefits of technology 3 / 7 bis - central bankers'speeches the key area where a lot of work is underway is evaluating the use of technology in financial services and assessing how rbi as a regulator can harness the benefits of technology for greater public good. the foundation of the digital revolution of today has been built on the digitalisation push of government of india and enabling regulations by the reserve bank. to give an example, the financial stability and development council - sub committee ( fsdc - sc ) had set up a working group in april 2016 to look into the granular aspects of fintech and its implications so as to review and reorient the regulatory framework. sequel that on the framework for peer to peer ( p2p ) lending was issued in april 2016. further, guidelines for account aggregators were also introduced in september 2016. moreover, the rbi established its regulatory sandbox in august 2019. all of us here are well aware about the transformation of payments space in india where we can be proud of the country's progress and prowess. post covid, digital economy had got a push and adaptation rates have increased multifold. this has brought up newer challenges, especially in digital lending products such as issues pertaining to coercive practices, dark patterns and excessive interest and other financial charges. to address some of these issues rbi issued digital lending guidelines in 2022 to regulate such practices. further, when industry innovated through structures like loss default guarantees, rbi supported such initiatives by issuing suitable regulations in june 2023. reserve bank has thus strived to remain ahead of many of its global peers in nurturing fintech innovations by way of regulations to support them from time to time. as i have alluded to previously2 that with newer players entering the financial services space and disrupting the rules of the game, banks may become but one amongst host of entities competing to win customer's business. therefore, the focus of the banks as well as regulators has to pivot from intermediation paradigm to marketplace