to facilitate integration of financial markets. reform measures encompassed removing structural bottlenecks, introducing new players / instruments, ensuring free pricing of financial assets, relaxing quantitative restrictions, strengthening institutions, improving trading, clearing and settlement practices, encouraging good market practices and promoting greater transparency. these reforms gradually facilitated the price discovery in financial markets and interest rate emerged as a signaling mechanism. this paved way for introduction of the liquidity adjustment facility ( laf ) in 2000 – 01 as a tool for both liquidity management and also a signalling device for interest rates in the overnight money market. amid greater integration of domestic financial markets with global markets, subsequently, the rbi also began to recognise the impact of global developments on domestic monetary policy. the developments in financial markets enabled the reserve bank to use market - based instruments of monetary policy and utilise the forward - looking information provided by financial markets in the conduct of monetary policy under the multiple indicators approach. 24. although various segments of financial markets had acquired depth and maturity over time, a key challenge has been on fuller and faster transmission of policy rate changes not only to money market segments but also to the broader credit markets. in order to address these challenges, the reserve bank has been trying different models. at the same time, the liquidity management framework was also fine - tuned since april 2016 with the objective of maintaining 5 / 6 bis central bankers'speeches the operating target close to the policy rate. under this framework, the reserve bank assured the market to meet its durable liquidity requirements while fine - tuning its operations to make short - term liquidity conditions consistent with the stated policy stance. this was achieved through a variety of instruments including fixed and variable rate repo / reverse repo of various maturities, the marginal standing facility ( msf ) and outright open market operations – complemented at times by the cash management bills and foreign exchange swaps. challenges in the current context 25. one of the major challenges for central banks is the assessment of the current economic situation. as we all know, the precise estimation of key parameters such as potential output and output gaps on a real time basis is a challenging task, although they are crucial for the conduct of monetary policy. in recent times, shifting trend growth in several economies, global spillover effects and disconnect between the financial cycles and business cycles in the face of supply shocks broadly explain why monetary policy around the world is in a state of flux. nonetheless, a view has to be taken on the true nature of the

shaktikanta das : seven ages of india ’ s monetary policy address by mr shaktikanta das, governor of the reserve bank of india, at the st. stephen's college, university of delhi, delhi, 24 january 2020. * * * i am delighted to be back in my alma mater. being here, brings back a surge of memories. today, i wish to dwell upon a few aspects of central banking in the indian context and rbi ’ s role in the current situation. i shall specifically focus on the evolution of monetary policy regimes in india and if i am to use the poetic license of shakespeare, may i call it the seven ages of india ’ s monetary policy? 2. the history of central banking goes back to the seventeenth century when the first institution, ‘ the riksbank ’, recognised as a central bank was set up in sweden in 1668. set up as a joint stock bank, it was chartered to lend funds to the government funds and to act as a clearing house for commerce. later on, the riksbank abandoned commercial lending and was granted a monopoly for issuing banknotes in 1897. subsequently, several countries set up institutions that functioned as central banks. these early central banks like the bank of england and banque de france, though set up with private capital, helped sovereigns finance their debt and were engaged in banking activities. since then, the role of central banks across countries has constantly evolved in line with the changing needs of their economies and evolving financial structure. today, the functions of modern central banks are vastly different from what was expected from their early counterparts. 3. let me briefly outline how the profile of the reserve bank has been intrinsically interwoven with the economic and financial developments in our country since independence. 4. the reserve bank was set up under the reserve bank of india act 1934 with the original preamble that describes the broad mandate of the reserve bank as follows : “ it is expedient to constitute a reserve bank for india to regulate the issue of bank notes and keeping of reserves with a view to securing monetary stability in india and generally, to operate the currency and credit system of the country to its advantage ”. 5. later, the reserve bank of india was nationalised in 1949. while the reserve bank continues to perform its traditional functions such as currency management, bankers ’ bank and banker to the government, its function of conducting monetary policy has undergone a sea change in various respects from time to time. 6