Liquidity in the system, too, would be maintained as per the assertion made in October in the monetary policy, Mr Reddy said on the sidelines of Becon 2000 in New Delhi on Wednesday. Earlier, in his valedictory address, he also reiterated the need to tighten prudential requirements for banks, though he conceded that they were within their rights to seek an "appropriate" pace for such measures.

Dr Reddy stressed on the commitment of the apex bank to reduce the statutory liquidity ratio (SLR) "as soon as possible". However, he said that this was contingent on the pace of fiscal adjustment and conditions in the international and domestic financial markets. Dr Reddy dwelt at large on the role of central banks in the millennium, and listed macro-analysis and macro-policy issues, the development of foreign exchange markets and the development of institutional and technological infrastructure both globally and locally.

He pointed out that if digital money came to dominate the financial markets, the leverage that central banks had could diminish. He also did not rule out the privatisation of government-run central banks or the nationalisation of private central banks. He said this was a cyclical phenomenon influenced by the external environments in different economies.