ABSTRACT
The conversations with Dr Reddy provide a larger canvas to understand the role of RBI and its developmental role as against several other central banks that may have a narrow monetary role. Thus, there is an argument in the chapter as to how this developmental role changes under different circumstances – the setting up of institutions and tighter mandates when the overall economy is controlled to hiving off the “developed” institutions to the open markets as the ecosystem evolves.
The chapter provides an insight into how the central banker would and ought to respond in case of an innovation. Using the case of MFIs which started as not-for-profit organisations, which innovated in the inclusive finance space, Reddy builds an argument for regulatory forbearance and regulatory activism and discusses the timing. The chapter looks into the interface between public policy making by the State and the regulatory architecture of a central bank – the tensions and the convergences between the developmental, market, inclusiveness and growth agendas.
