and of financial markets – which is what these measures sought to address – provides some evidence of the efficacy or otherwise of the rbi ’ s pandemic response. ahead of the pandemic ’ s onset, the indian economy was into a cyclical downturn, with real gdp growth having decelerated in 2019 - 20 to its lowest rate in a decade. consequently, monetary policy had turned accommodative from february 2019, with a cumulative reduction of 135 bps in the policy rate up to february 2020. system level liquidity was kept in surplus from june 2019 in consonance with the stance of monetary policy. at the end of february 2020, market participants had deposited excess liquidity of the order of ₹3 lakh crore under the laf. the first quarter of 2020 - 21 bore the full brunt of the pandemic ’ s onslaught. with mobility of people and goods dropping to all - time lows, real gdp contracted by a precipitous 24. 4 per cent, which was among the deepest in the world. unemployment peaked at 24 per cent in april, although in rural areas, farm activity displayed pandemic proofing and the mahatma gandhi national rural employment guarantee act ( mgnrega ) provided a measure of insulation. exports plunged 61 per cent in april, with a commensurate decline in imports. the national statistical office could not collect price quotations for compiling the consumer price index due to the nation - wide lockdown and had to resort to imputations. by early june, the fury of the pandemic abated and the pace of infections started to ebb. this emboldened the unlocking of the economy in a phased manner that took up to the end of december 2020 to be completed. as businesses haltingly resumed operations and mobility around workplaces, grocery stores and pharmacies improved, outmigration started to reverse and the unemployment rate eased to 10. 2 per cent. supply and work disruptions showed up in inflation surging to 6. 2 per cent in june. the indian economy remained in contraction in the second quarter of 2020 - 21 and it was only in the second half of the year that on the back of policy stimulus, festival - related spending and the release of pent - up demand a hesitant and uneven recovery started taking shape. meanwhile, the rbi ’ s measures brought down borrowing costs to their lowest in 17 years and narrowed spreads across rating categories on corporate bonds, commercial paper

name'fintech '. it would be useful to remember that, apart from the difference in speed and scope, neither the older innovations nor the current fintech innovations change the basic nature and functions of the financial system. the major transformation that characterises the fintech ecosystem is the increased efficiency with which financial products and services are delivered and consumed. this efficiency is driven largely by ( a ) digitisation of information which can then be accessed, processed and transmitted with ease, ( b ) more direct interface between buyers and sellers, between borrowers and lenders and between payers and receivers, which optimises transaction chains, and ( c ) democratisation of fast communication channels that expands the reach of the financial system. put together, these efficiencies lead to lower cost, quicker transactions and better inclusion. this is clearly a desirable outcome 1 / 4 bis - central bankers'speeches and one that should be actively encouraged and promoted, which is what the focus of policy making and regulation currently is. but innovative developments raise different issues, not undesirable in themselves, but which need to be addressed nonetheless. one issue is the relative roles of traditional financial institutions, especially banks, vis - avis the fintech entities. should their interaction be driven by motives of collaboration or competition? the second issue is what should be the approach of financial regulators. how is fintech ideally regulated, same as traditional finance or differently. i shall try and talk about these two issues briefly in what follows. collaborate or compete traditional financial players ( let us use the term'banks'for simplicity ) have come to acknowledge the impact of fintechs on their functional roles and they are reacting in one of two ways. the first way is by internalising innovations, thereby placing themselves in competition to fintech entities. the second way is by collaborating with fintechs – either by engaging in one - to - one partnerships or by purchasing the services of fintech players. the latter kind of collaboration can be functional, in the sense that fintech entities can perform functions where they have the competitive advantage and banks focusing on areas of their expertise. while customers benefit from an improved experience with curated products and services at competitive prices, regulators also draw comfort in these arrangements as traditional financial entities like banks / nbfcs which are well regulated and continue to discharge the primary responsibility of risk management through their balance - sheets. perhaps the sweet spot lies in fintechs acting as both competitors as well as collaborators. the existence of