: achievement and maintenance of macroeconomic stability, especially price and financial stability ; in addition, meeting the pre - requisites for the monetary union and creation of key institutions responsible for implementation of the eamu roadmap ; establishment of an efficient payment mechanism ; and, through macro - prudential regulation of the financial system. your excellency, ladies and gentlemen, the recent financial crisis has shown that although financial integration improves access to financial markets and the opportunities for risk diversification, it may also increase the scope for financial contagion effect across countries. in this regard, eac central banks must ensure that financial stability arrangements keep pace with the degree of financial integration ; strengthen supervisory capacity and financial sector resilience ; and, ensure adequacy of capital and liquidity buffers. ladies and gentlemen, financial stability requires a concerted effort by key stakeholders. it is therefore important for eac central banks to strengthen synergies with other financial sector players. but also we have seen the benefits of innovations in the financial sector for inclusive growth and reducing cost of doing business. to conclude, your excellency, ladies and gentlemen, i once again want to reiterate that the benefits of regional integration outweigh the challenges and that eac countries can overcome the challenges. the central banks in the region have a role to play in the transformation of the eac economies. consequently, the eac central banks have put their best foot forward to support the integration agenda during the 10 year transition window to the establishment of the eac central bank. to accomplish this, the eac central banks will harmonize their macroeconomic frameworks and policies and enhance internal capacities within the region. thank you, your excellency, thank you, ladies and gentlemen. bis central bankers ’ speeches

domestic participants to manage exchange rate movements and reflected the desire to accommodate greater flexibility in the exchange rate in the future. the pboc has entered into a series of bilateral currency swap agreements whereby the pboc and other central banks ( over 20 in number ) have agreed to exchange the rmb with the respective counterparty currencies. 15. the size of the indian economy of around us $ 1. 8 trillion is one of the largest in the region and despite some moderation in the growth in the past couple of years, it is still one of the fastest growing countries in the world. the value of the indian rupee is marketdetermined without being pegged to any currency. india ’ s foreign exchange reserves are amongst the largest in the region. all these factors make the indian rupee a natural candidate for being considered for greater internationalization, especially greater use of rupee for trade invoicing. comparisons are bound to be made between renminbi and indian rupee on the issue of internationalisation. 16. indian rupee is not fully convertible at this stage. while the current account has been made fully convertible, we have consciously followed a calibrated approach towards capital account convertibility. despite showing increasing trends during last few years, india still accounts for a very small proportion of the global foreign exchange market turnover. though rupee invoicing is permitted under extant fema regulations, almost the entire bulk of international trade in india continues to be denominated in the us dollars ( the share of dollar bis central bankers ’ speeches invoicing in exports and imports during quarter ended december 2012 stood at 90 per cent and 83. 6 per cent, respectively ). we also need to recognise other structural bottlenecks that come in the way of transforming mumbai as an international financial centre similar to hong kong. 17. it is also important to understand that unlike china, which runs large current account surpluses, india has generally been a current account deficit country. in view of the large current account deficit, the exchange rate of the rupee is susceptible to the debilitating influence of large capital movements, especially during crisis periods. our accumulated reserves are in a sense “ borrowed ” reserves and not “ earned ” reserves in true sense. the sense of self insurance by having enough reserves can often prove to be misplaced, especially, during times of sudden reversal of capital flows. this does not mean that we should not aspire to see the rupee as an international currency.