has become the money centre. consequently, as we proceed outwards on the term curve, we encounter india's missing markets – the segment between 3 days and three months. the reserve bank has stepped in by removing statutory pre - emptions on interbank liabilities and by conducting term repos / reverse repos of varying maturities but to no avail. vestiges of the cash credit system and unnotified premature withdrawal of deposits add to these frictions. undoubtedly, alternatives exist in the form of overnight indexed swap rates, yields on treasury bills of residual maturity and polled term mibors, but nothing can substitute for a term curve generated from actual transactions. another issue in the overnight segment is that of traded deals and reported deals, the latter involving cooperative banks lending in the later half of the day to scheduled commercial banks at rates lower than traded rates and artificially pulling down the aggregation. this drives a wedge between the policy rate and the weighted average call money rate, which is the operating target. 4 / 9 bis - central bankers'speeches thus, even before the monetary policy signal travels through the overnight and term segments of the money market to the next reference point on the yield curve – the 91day treasury bill ( t bill ) rate – some part is already lost in transmission. primary yields on 91 - day t bills are largely influenced by cut - offs, which price in the policy rate as well as expectations on its future course, as embedded in the stance of monetary policy. in the secondary market, trading is concentrated in the 91 - day t bills, with the 182 - day and 364 - day t bills being highly illiquid. given this discontinuity, the situation in india calls for active market making in each of them and perhaps issuances of t bills of other maturities as well so that a continuous risk - free yield curve emerges. in the commercial paper ( cp ) segment, which typically prices off the risk - free rate, issuances are concentrated in maturities of up to three months, with 95 per cent of all issuances in the highest rating category. cp rates on instruments of more than three months maturity are highly volatile and unduly influenced by idiosyncratic factors that may not be in sync with the prevailing monetary policy stance. furthermore, about 40 per cent of resources mobilised through cps is by non - banking financial companies or nbfcs ( including housing finance companies or hfcs ), which

. g., ferguson, 2009, sheng, 2009 ; chittenden, 2010 ; roubini & mihm, 2010 ; turner & others, 2010 ; pringle and jones, 2011 ; cafral - bis, 2011 ; blanchard & others, 2012 ; shiller, 2012 ). my reflections are moulded by not only a decade in central banking but also many years in macroeconomic management in federal government and the bretton woods twins, in addition to a much longer period at provincial and local levels of government dealing directly with the public. keeping in view the composition of today ’ s audience and the key role of central banks in finance, i will be exploring select themes of operational significance to central banks at the present juncture. society and finance an assessment of the impact of the recent global financial crisis on the trust and confidence of society in the financial sector is a useful starting point when considering ways of restoring the trust. a major reason for the erosion of trust may be a sense that there has been a comprehensive capture of regulation of the financial sector by the finance industry, particularly in the leading advanced economies. a demonstrable commitment to provide reasonable access to essential financial services to all segments of society would reinforce the assertion that finance serves the larger community. this approach, which may broadly be described as inclusive finance, goes beyond the current concerns with providing consumer protection and ensuring systemic stability. restoring trust it is true that the occupy wall street movement directed at the financial sector has petered out. this may signify a lack of popular support for the movement, or equally it may signify a lack of hope that things will change or that better alternatives are on the horizon. a society ’ s trust and confidence in finance, like in any other sector, is derived partly from formal laws, regulations and procedures, and partly on the manner in which they are implemented, through both formal and informal channels. trust is, therefore, difficult to measure, but on the basis of surveys conducted and anecdotes reported in the media, there appears to be an erosion of trust in the financial sector as a whole, and banking in particular, in advanced economies. the perceptions of such an erosion of trust, however, differ. what are the plausible reasons for the erosion of trust in some jurisdictions? we can only speculate. first, large sections of the population have been affected by the financial crisis, and they consider themselves innocent victims of the crisis in financial sector. in particular, they feel that