Back to Mint Street, Yaga Venugopal Reddy's first words to the media on taking over as the 21st governor of the Reserve Bank of India on Saturday is a pointer to his future monetary policy stance.

"Continuity and change will be mixed appropriately, depending on the situation. RBI has always believed in continuity and reforms is a continuous process."

The few words he said upon being coaxed by the outgoing Governor Bimal Jalan, equally personifies how he has returned to 'continue' his stint at the RBI.

This is after a 'change' in his career path when he was appointed as India's executive director to the International Monetary Fund in August 2002. Before that, Reddy was a RBI deputy governor for seven years from September 1996.

Interestingly, Reddy, 62, is the first RBI governor to be given a five-year term on appointment. This clearly sends out a signal of 'continuity and stability'. Past governors had been given an initial two-year term, which was then extended -- was the case of Jalan, who spent six years at the Mint St helm.

On the 18th floor of the RBI headquarters, Reddy took the oath of secrecy by signing on the parchment where 11 of his predecessors had signed.

Jalan was at his wittiest as he handed over charge. Taking off on Reddy's first utterance to the media as the RBI governor, Jalan said: "He will change what I started, and will continue with what he had started." 

Jalan had earlier said that he wanted the rupee to be as good as the dollar, yen, pound sterling and euro.  It is now up to Reddy to make his dream come true.

Interestingly, there have also been occasions when Reddy's views have been different from Jalan's.

Jalan's reign brought about stability to the strengthening rupee and has led the economy towards a soft interest rate regime. This stance will automatically be a part of RBI's continuous policy.

Change is, however, likely in terms of administered rates as market participants feel the need for a reduction here in order to bring about convergence of all interest rates.

Reddy has in the past played a critical role in the development and reforms of the debt market. It is expected that he will continue with this process, while at the same time look into other areas that need change.

Reddy has taken over when the economy is in the pink of health looking at the strong fundamentals and the fact that foreign exchange reserves are well over $85 billion.

Little wonder, then, that Jalan, posing as a reporter, asked the new governor, "Will forex reserves touch $ 100 billion? Will the soft interest rate bias continue?"

A reluctant Reddy responded that the media ought to ask the new Member of Parliament.

More than likely the present soft interest rate bias will continue given the state of the economy and the latest 50 basis point reduction in the repo rate, just days prior to Jalan's exit.

Indeed, when Jalan took charge last century, it was at a time when interest rates went through a roller-coaster ride.

During his rein, the repo rate moved from seven per cent in July 2000, shooting up to a high of 15 per cent in August 2000 to fall to the current low of 4.5 per cent.