##rse has the potential to become such a bridge. clearly, the leave vote poses new challenges for the corporate governance of the merger : the parties concerned need to find a governance structure which balances all reasonable interests – even at the expense of synergies. furthermore, i am convinced that, in the medium term, euro clearing cannot take place to the existing extent in london – frankfurt would be the more appropriate alternative. the referendum commission set up by deutsche borse and lse is now being put to the test in terms of its ability to work calmly, and needs to keep in mind the economic rationale of the proposed merger which has gained greater credence through the brexit vote. but uncertainty following the brexit decision is much less due to economics and much more due to politics. indeed, almost all the economic consequences are associated with political uncertainty. as we all know, economic uncertainty is a product of political uncertainty. the fact that the mechanics of leaving the eu are laid down in article 50 of the treaty of the european union is well - known to most people by now, but it only governs the negotiation process without changing the complexity of its nature in any way. clearly, the practical implications of a brexit depend to a large extent on what will be agreed upon in brexit negotiations. and this is also true with respect to banks on both sides of the channel. many institutions have shaped their business models in accordance with the cooperative financial framework in the eu. european banks based on the continent operate in the uk market and have branches in london. the city of london is also home to a great number of non - european institutions which use the passporting regime of the eu to conduct business in any other eu country, making london a hub for the entire european banking market. so what could happen with respect to the passporting regime once the negotiation period has ended? one thing is clear : it will very much depend on politics. in the event that the united kingdom decides to remain a member of the european economic area ( eea ), not a great deal would change for banks and enterprises on both sides of the channel. eu rules for banking super - vision equally apply to members of the european economic area. current supervisory powers would likewise remain unaffected. naturally, eu membership does not only cover free trade. it also means applying the full body of eu legislation, a key component of which is freedom of movement. on the one hand, financial institutions in london have bene

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,