in the fit framework is expected to be decided jointly by the government and the central bank. hence, the fit framework requires these two institutions to work together, as there should be no misalignment between fiscal and monetary policy. the central bank will continue to resort to active omos to manage liquidity in the money market, thereby guiding the short - term market interest rate, which is the key operating target to navigate inflation in the targeted range. i wish to emphasise the fact that omos are a strategy to manage market liquidity to align short term market interest rates with the policy stance and not a mechanism to print new money by purchasing or holding treasury bills by the central bank as wrongly interpreted by some analysts. a clear distinction must be made between such omos, widely practiced by central banks, and monetising the fiscal deficit through the central bank purchasing treasury bills issued on behalf of the government. further, we have implemented several measures to provide more information to market participants thereby facilitating an efficient price discovery process in the financial markets. the central integrated market monitor ( cimm ) system was introduced, in january 2018. the system captures vital market information from the call money, the government securities and the foreign exchange markets. daily liquidity estimation was further improved with the implementation of the liquidity reporting system through the cimm. further, a policy intervention by way of restricting non - bank primary dealers from participating in omo auctions was made in the money market with a view to strengthening the signaling effect of omo auctions. non - bank primary dealers continued to enjoy access to standing facilities and the intra - day liquidity facility. meanwhile, at the most recent policy rate adjustment, we narrowed down the policy rate corridor to 100 basis points with a view to reducing the volatility in overnight interest rates. looking ahead, we are in the process of exploring the feasibility of a single policy rate instead of the current corridor system to give clearer signals on the interest rates, reduce volatility in the call money rate and increase the transparency in the monetary implementation process. also, the hair cut policy relating to the pricing of securities will be reviewed in line with international best practices to ensure smooth operations in the money market. we will be looking into expanding money market activities in a comprehensive manner by introducing new instruments such as interest rate swaps ( irs ) and nondeliverable forwards ( ndf ). in order to improve the competitiveness of the banking sector, the central bank is also planning to

deficit, subpar economic growth, deceleration in monetary aggregates and credit, moderate levels of inflation as well as continuing deficit liquidity conditions in the money market. the tight monetary policy stance pursued by the central bank, since end 2015, by way of raising the statutory reserve ratio ( srr ) and policy interest rates yielded the desired outcomes, especially on demand driven inflation and trends in money and credit aggregates compared to 2016 and 2017. such developments, in particular, the favourable developments in inflation, inflation outlook and the trends in the monetary sector, in an environment of lackluster growth performance, induced the central bank to signal the end of the tightening cycle in early april 2018, by way of reducing the standing lending facility rate ( slfr ) by 25 basis points. nevertheless, global economic conditions and the pressure on the exchange rate has compelled the central bank to maintain a neutral monetary policy stance since april 2018. in the conduct of monetary policy, market based policy tools, particularly policy rates and open market operations ( omos ) were widely used, while the srr was also used as a tool of injecting liquidity to the market on a permanent basis. in view of the large and persistent shortage in rupee liquidity, the monetary board decided to reduce srr applicable on all rupee deposit liabilities of commercial banks to 6. 00 per cent from 7. 50 per cent in november 2018. the reduction in srr released a substantial amount of rupee liquidity to the banking system, which could have led to a reduction in interest rates and excess aggregate demand. therefore, in order to neutralise the impact of the srr reduction and maintain its neutral monetary policy stance, the central bank raised policy interest rates simultaneously. since the announcement of the transition towards fit, we have broadly maintained low levels of inflation in spite of some occasional upticks and downturns due to various demand and supply shocks stemming from the external and domestic fronts. benefiting from prudent and proactive monetary policy measures that were also supported by several macroprudential measures, monetary expansion was contained at desired levels, thereby supporting the maintenance of low levels of inflation during 2018. as you all know, the central bank has an unblemished track record of maintaining single digit inflation continuously for a decade. this also shows the central bank ’ s strong commitment to price stability, which it considers to be of utmost importance to create an enabling environment for the economy to achieve an accelerated trajectory of economic