% germany france 2. 0 % france 9. 0 % italy 2. 0 % italy 8. 9 % 9. 0 % switzerland 2. 6 % netherlands japan 0. 2 % 0. 5 % united kingdom canada 15. 8 % 22. 0 % 59. 9 % france italy 365. 5 switzerland 68. 9 netherlands 0. 3 % germany 45. 0 italy canada 1. 6 % united states 54. 3 france sweden 1. 7 % sweden gold / currency in circulation 45. 1 germany switzerland japan 12. 3 33. 0 % 97. 1 % netherlands 6. 0 46. 8 % 1. 7 % united kingdom 16. 0 % belgium 29. 1 belgium belgium canada 30. 5 united states united kingdom 1. 8 % 1. 6 % 0. 1 % grams of gold per capita japan japan 0. 6 % sweden 5. 2 % united kingdom 1. 1 % belgium 25. 4 % switzerland netherlands 19. 5 % sweden 16. 6 canada 2. 6 14. 3 % 3. 3 % source : iwf, oecd as you can see, switzerland probably represents an extreme case with regard to gold holdings. the fact that the question of possible gold sales by the snb in the market has not arisen until recently is due to several technical and psychological factors : • • • • gold is still valued at its last official price of 1971 in the snb ’ s balance sheet, only one - third of its market value is shown ; in the past, the snb was required to back 40 per cent of the banknotes in circulation with gold, which did not leave any room for action ; the sale of gold requires a fundamental reform of the swiss monetary system, which, because of our direct democracy, is a long and complex process ; finally, in the public ’ s mind, the swiss franc and gold were so closely linked that the idea of selling gold seemed to be rather unrealistic. things started to move in february 1997. at that time, a first decision regarding demonetisation of gold was taken by the economic committee of the national council, one of our two houses of our parliament. two months later, in may 1997, the market became fully aware of the gold issue, when the president of the confederation proposed to parliament to allocate a part of the revaluation gain on gold to fund a swiss foundation for solidarity which would provide assistance to persons in need in switzerland and abroad. it was established from the

in the today ’ s world change rapidly, there will be great temptation to adjust the regulatory framework as well. let me give an example. during 2007 – 08, we faced an unprecedented surge in capital inflows. sharp appreciation of the rupee, reserve bank ’ s market operations, consequent liquidity impact and the fiscal cost of sterilization are all in recent memory. several measures were taken in this milieu, such as, increase in the limits for lrs, allowing foreign companies to raise capital in india through indian depository receipt ( idr ), introduction of currency futures, etc. the situation changed rapidly post onset of the global financial crisis ( gfc ), and, after some lull during 2010 – 11, again post us downgrade, eu crisis, etc. do we unwind all the decisions and measure taken during times of plenty? this, in a way, justifies the approach of cautious gradualism that we have been adopting so far. regulating derivative contracts : onshore & offshore 19. now i come to the other tool i mentioned about for controlling rupee volatility : restriction on derivatives. our view of derivatives has been to treat them as a tool of risk management and as an instrument of hedging foreign exchange risk. this is reflected in the regulatory regime for forex derivatives in the otc market which has the following two distinguishing characteristics. first, the ability of a firm or an individual to execute a derivative contract is based on an underlying exposure embodying risk. second, these contracts, at least those involving rupee, are predominantly to be executed by physical delivery. over the years, to enable the firms to manage their foreign exchange risk flexibly and efficiently, several relaxations have been introduced, such as, carrying out derivative transactions on the basis of past performance rather than on the basis of individual underlying contracts, cancelling derivative contracts even as the underlying exposure exists ( and getting the benefit or bearing the loss thereof ) with scope to rebook the contract against the same exposure, etc. these relaxations can potentially be used to take a view on the rupee when expectation of sharp depreciation ( or appreciation ), rightly or wrongly, is strong. this aggravates the market conditions. we have often resorted to curtailing the freedom of market bis central bankers ’ speeches participants in respect of booking derivative transactions both to curb panic as well as to stem speculative view taking on the rupee. non - deliver