bis central bankers ’ speeches equity market or even debt. doesn ’ t it follow as a corollary that the inr should also become an object of their attention? however, as an economy moves along the path of liberalisation and globalisation, ideally the endeavour must be to bring on - shore all genuine hedging requirements of non - resident entities. a connected issue is invoicing in inr. we are well aware that this is yet to catch the fancy of the market participants on a sustained basis. a one - way movement of inr certainly increases its invoicing flavour amongst the probable beneficiaries. but the true test of a currency of invoice is the country ’ s macro economic strength. the ease with which the currency and related risks can be hedged would be a key determinant in accessing the product. all that i would like to emphasise is that rbi would endeavour to create an enabling environment. we have recently moved a step forward by allowing hedging opportunities to non residents. the experience gained will certainly facilitate evaluation and moving ahead. i believe a congregation of this nature must go beyond deliberating issues of proximate concerns. a strategic element / flavour would add value to the deliberations and aid in delineating the future trajectory of regulations. moving towards this vision, i suggest a futuristic question on this occasion to the market participants - an intellectual debate. what are the attributes of a reserve currency? is fuller capital account convertibility of the currency a prerequisite? where does inr stand in this regard? i would like the annual meet to have a robust discussion, may be in a more sober mood. let me now conclude. i have highlighted the following issues that will guide our efforts in development and regulation of forex market in the foreseeable future. a. further development of the forex market has to be looked alongside the progress on capital account liberalization which in turn is dictated by broader macroeconomic concerns and emergent international environment. b. the reserve bank has been actively pursuing improvement in the otc market infrastructure and is committed to making further efforts to ensure compliance with the global best practices. c. the otc forex market in india is a part of the relationship banking and thus, the banks have a responsibility to ensure the appropriateness and optimality of the transactions from the customer ’ s view point. d. international interest in inr and emerging off - shore markets are consistent with progressive

event, a halfway solution – along the lines of increased joint liability while leaving national sovereignty in financial matters as it is – would undermine incentives for sound fiscal action. that would harbour the risk of monetary policymakers again being called to the rescue – and far too much has already been demanded of monetary policy in the current crisis. as long as liability and control are not aligned at the european level, there is therefore only one way to stabilise the monetary union in the long run. that way consists in affirming the decentralised approach of the maastricht framework and reinforcing the principle of national responsibility. at first, that may seem to be a case of looking backwards. but that impression is deceptive, because it is not about restoring the monetary union to its pre - crisis condition. rather, the asymmetric maastricht framework should be designed so as to make the structure stable without depending on a political union. to do that, the binding force of the debt rules should be strengthened. admittedly, that was precisely the objective of the last reform of the stability and growth pact. however, it ended up conceding considerable discretionary scope, mainly to the european commission. torn in two directions in its dual role as a political institution and guardian of the treaties, the commission is frequently inclined to compromise at the expense of budgetary discipline. this means that the binding power of the debt rules has ultimately tended to be weakened. a more consistent interpretation of the rules could have been achieved if responsibility had rested with an independent fiscal authority for budgetary surveillance instead of the commission. please note : an independent authority – a committee which only advises the commission, as proposed by the five presidents, would fall short. past developments have made it abundantly clear that political agreements alone are not enough to ensure sound public finances. that was evidently also how the founding fathers saw the situation. by introducing the no - bail - out clause, they sought to allow the disciplining forces of the financial markets to come to bear. but that can only work if the no - bail - out principle is made credible. “ whoever reaps the benefits must also bear the liability. ” this liability principle, as once described by walter eucken, also needs to be applied to sovereign debt. investors have to perceive a credible threat of losing their money if they buy bonds from governments that have unsound public finances. the crisis has brutally exposed the fact that sovereigns, too, can