We have taken several progressive measures to communicate more information, including cut-off yield rates of the OMO auctions and overnight liquidity estimates with a view to encouraging more efficient price discovery in the money market and promoting informed decision making by market participants as well as to improve market signaling of OMO. The Central Bank will continue to actively engage in liquidity management, while guiding the short-term interest rates along a desired path. Several measures, such as reviewing the compilation methodology of benchmark interest rates, strengthening the operational framework pertaining to the Intraday Liquidity Facility (ILF), introducing a rule-based code of conduct for Authorised Money Brokers and promoting market development will be taken to improve the efficiency and compliance in respect of money market operations. 11  As announced last year, the Monetary Policy Consultation Committee (MPCC) was reestablished in mid-2017 to draw on external expertise to support the conduct of monetary policy. We will continue to take on board stakeholders’ views and align our policies in a way, which is mutually beneficial for stakeholders and the Central Bank. As the conduct of monetary policy is dependent on an effective and prudent exchange rate policy, the Central Bank has introduced a more market based exchange rate system. It has allowed more flexibility in determining the exchange rate based on the market conditions and has intervened only to smoothen volatility and to build up reserves.
The reform agenda of the government includes improving financial viability of the State Owned Enterprises (SOEs) to mitigate the budgetary implications for the government. While introducing clear frameworks and reforms in relation to monetary and exchange rate policies in 2017, we have implemented several policy measures during 2017 to address the challenges in the financial sector and maintain a stable financial system for effective monetary policy transmission and to support sustainable growth. With a view to promote a dynamic and resilient financial sector, the regulatory and supervisory framework of the Central Bank was further strengthened in line with international standards and best practices. At present, our banking sector accounts for over Rs. 10 trillion in assets, while the non-bank financial institutions sector accounts for over Rs. 1 trillion in assets. The implementation of Basel III capital standards was commenced in 2017 in order to develop a more robust banking sector. The framework to regulate the non-bank financial institutions was strengthened under challenging conditions, and resolution of distressed finance companies was also commenced. During 2017, the Central Bank continued to strengthen the regulatory framework for the microfinance sector, and continued to combat the menace of illegal pyramid schemes with the assistance of other government agencies. Several measures were adopted to strengthen and modernise the payment and settlement infrastructure in order to develop an efficient and stable payment and settlement system in the country, as well as to pave the way towards a digital economy.