of sme customers in this country are not getting fair rates for their hedging transactions. this is a serious missed opportunity in my perception and calls for some serious cooperative efforts among the banks to offer finer rates to the sme clients who today feel that what they are faced with is a " rip off ”. you might argue that it has been the age old practice that rates are often way off the normal distribution for smaller transactions. but we can always make a sincere effort to change set thoughts and practices. i would urge some of the participants to put up their hands and take this thought process forward. otc vs. futures 20. before i close, let me flag one issue for brainstorming. the otc forex markets and the currency futures are two different market segments for the same product. both are governed by two different regulatory framework in terms of requirement of underlying, delivery and the extent of position taking by participants. we can no doubt have competing market segments as competition will bring in more efficiency. but, how can the competition be fair when the playing fields are completely asymmetric? this, in my view is an important issue warranting further public debate. but we need to underscore the fact that exchange rate is a critical macro - economic variable particularly for countries having capital controls, perhaps no less sacrosanct than the policy interest rates which are targeted by the central banks, the world over. we also need to bear in mind that excessive overshooting and volatility in such a critical variable can have adverse financial stability implications. i will leave you with the thought that there is a paramount need for aligning these market segments, perhaps with a road map over an acceptable time span. bis central bankers ’ speeches concluding remarks 21. let me now try and summarize what i have discussed. volatility is an unavoidable feature of all financial markets and heightened volatility in the forex market that we witness today is neither unprecedented nor unexpected. all economic agents with currency risk will have to frame a conscious risk management policy to cope with the impact of the volatility on their cost, revenue and profit. even as the reserve bank strives to maintain orderly conditions in the forex market, certain behavioral issues that tend to accentuate volatility have to be understood by all market participants and factored into their response and risk management strategy. i have also flagged the issues of forex inclusion for the sme sector and the need

moving ever lower. these perceptions, in turn, have reduced the extra compensation that investors require for making loans to, or taking ownership positions in, private firms. to a considerable extent, investors seem to be expecting that low inflation and stronger productivity growth will allow the extraordinary growth of profits to be extended into the distant future. indeed, expectations of per share earnings growth over the longer term have been undergoing continuous upward revision by security analysts since 1994. these rising expectations have, in turn, driven stock prices sharply higher and credit spreads lower, perhaps to levels that will be difficult to sustain unless economic conditions remain exceptionally favorable - - more so than might be anticipated from historical relationships. in any event, primarily because of the rise in stock prices, about $ 12 trillion has been added to the value of household assets since the end of 1994. probably only a few percent of these largely unrealized capital gains have been transformed into the purchase of goods and services in consumer markets. but that increment to spending, combined with the sharp increase in equipment investment, which has stemmed from the low cost of both equity and debt relative to expected profits on capital, has propelled the economy forward. the current economic performance, with its combination of strong growth and low inflation, is as impressive as any i have witnessed in my near half - century of daily observation of the american economy. the consequences for the american worker have been dramatic and, for the most part, highly favorable. a great many chronically underemployed people have been given the opportunity to work, and many others have been able to upgrade their skills as a result of work experience, extensive increases in on - the - job training, or increased enrollment in technical programs. welfare recipients appear to have been absorbed into the work force in significant numbers. government finances have improved as well. the taxes paid on huge realized capital gains and other incomes related to the stock market, coupled with taxes on markedly higher corporate profits, have joined with restraint on spending to produce a unified federal budget surplus for the first time in nearly three decades. april ’ s budget surplus of $ 125 billion was the largest monthly surplus on record. widespread improvement also has been evident in the financial positions of state and local governments. the fact that economic performance strengthened as inflation subsided should not have been surprising, given that risk premiums and economic disincentives to invest in productive capital diminish as product prices become more stable. but the extent to which strong growth and high resource utilization have been