Anand Sinha: Indian banking - journey into the future
Remarks by Mr Anand Sinha, Deputy Governor of the Reserve Bank of India, at
Bancon2011, organized by the Indian Bankers Association and Indian Overseas Bank, Chennai,
6 November 2011.
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Inputs provided by Ms. Anupam Sonal are gratefully acknowledged
1. Shri M D Mallya, Chairman, Indian Banks' Association and Shri M Narendra,
Chairman, Indian Overseas Bank, the joint organizers of this mega event of the Indian
banking industry and other delegates. A very good evening! It is an honour for me to be here
today to deliver the valedictory address of this Conference which has come to signify an
annual confluence of banking minds for serious deliberations. These conferences give us all
an opportunity to reflect on the latest developments in the banking space and chart the future
course of action. In the current phase following the crisis, the environment has become so
fluid and dynamic that bankers need to be in a constant state of awareness and
preparedness to face the new challenges and also to adjust to the fast changing regulatory
landscape.
2. The Conference, over the span of three days, as I see from the program schedule,
has covered a wide range of important issues such as financial inclusion, wholesale banking,
technology, consumer experience, etc. I am sure these discussions have triggered new
thought processes and opened new vistas for us to go back and chalk out the
implementation strategy for making Indian banking more efficient, resilient and socially more
relevant.
3. As per the IBA-FICCI-BCG Report (August 2011), "India's Gross Domestic Product
(GDP) growth will make the Indian banking industry the third largest in asset size in the world
by 2025". However, being largest is not enough - being efficient is what we have to strive for.
The Indian economy has been growing fast and the GDP growth rate had averaged 8.8 per
cent in the last 5 years preceding the crisis. Despite a subsequent slowdown, India's GDP is
still growing at a reasonably fast pace. The Indian banking sector will, as such, need to
match up to the requirements of a fast growing economy including the likely acceleration in
the Credit to GDP ratio. Added to this is the demographic dividend with its myriad challenges
and opportunities. There is thus a huge responsibility on, and opportunity for, the Indian
banking sector going ahead.
4. Being responsible is no longer a choice for banks. Commercially profit is a laudable
objective but we have to remember that balancing the interest of all stakeholders, included
and yet to be included, is the only socially optimal choice which will ensure long term survival
and growth. Casino banking has no future. In this context, let me quote from the review by
Financial Times of Satyajit Das's book "Traders, Guns and Money" - "This makes fascinating
reading ..... old fashioned financiers will read it and weep ...".
II. Achievements of the Indian banking system
5. There has been appreciation for India for weathering the financial crisis relatively
unscathed. Much of it hinged on the sound and resilient banking system in the country. The
foundation for the banking sector resilience was laid with the introduction of the financial
sector reforms in 1991 with focus on prudential regulation and increased competition. These
reforms resulted in a comprehensive transformation of the banking sector. The reforms had a
major impact on the overall efficiency and stability of the banking system. The outreach of
banks increased in terms of branch / ATM presence. The balance sheets and overall banking
business also grew in size. The financial performance and efficiency of Indian banks
improved with increased competition, as reflected in their profitability, net interest margins,
ROA and ROE. The capital position improved significantly, and banks were able to bring
down their non-performing assets sharply. This reform phase also witnessed increased use
of technology which in turn, helped improve customer service.
6. While financial stability is not an explicitly stated objective under the Reserve Bank's
statute (RBI Act, 1934), various measures were undertaken from time to time to strengthen
financial stability in the system which covered a wide arena. The approach has evolved from
past experiences and a constant interaction between the micro level supervisory processes
and macroeconomic assessments. In the Indian context, the multiple indicator approach to
monetary policy as well as prudent financial sector management together with a synergetic
approach through close coordination between RBI and other financial sector regulators has
ensured financial stability. Some of the other policy measures include Capital Account
management, management of systemic interconnectedness, strengthening prudential
framework, initiatives for improving the financial market infrastructure, etc. Systemic issues
arising out of interconnectedness among banks and between banks and Non Banking
Financial Companies (NBFCs - our shadow banks) and from common exposures were
addressed by, among other measures, putting prudential limits on aggregate interbank
liabilities as a proportion of banks' Net Worth, restricting access to uncollateralized funding
market to banks and Primary Dealers with caps on both borrowing and lending, increasingly
subjecting NBFCs to more stringent prudential regulations as also restricting banks'
exposure to NBFCs to contain regulatory arbitrage. The other noticeable aspect regarding
policy measures has been the innovative use of countercyclical policies to address the
procyclicality issues. The countercyclical policies were introduced as early as 2004 by using
time varying sectoral risk weights and provisioning, though RBI had used them sporadically
even earlier. These unconventional measures taken in response to emerging risks are now
widely acknowledged to have played a significant role in protecting the Indian financial
system from key vulnerabilities.
7. We have, thus, much to be satisfied about, as we have come a long way since the
1991 reforms. Even as we rejoice in our achievements and success, we must have the
humility to acknowledge that much more needs to be achieved in our pursuit of excellence.
So let us look at the road ahead.
III. Indian banking - The road ahead
8. Future is always uncertain but coming times look more uncertain than ever. I am
reminded of a quip "The trouble with our times is that the future is not what it used to be".
There are plenty of "Known Unknowns and Unknown Unknowns". The future holds a lot of
opportunities as well as challenges for all of us. The Conference would have already focused
on the opportunities and how to make most of them. Let me list out a few challenges that
await us in the future.
9. For elaborating on the challenges that lie ahead of us. I would categorise them into
three broad categories viz.
A. Challenges in coping up with the emerging regulatory and supervisory framework
B. Challenges in meeting the specific needs of the economy and
C. Challenges in fixing the fault lines in the system.
A. Challenges in coping up with the Emerging Regulatory and Supervisory
Framework
(i) Implementation of advanced approaches under Basel II
10. The implementation of the advanced approaches under Basel II poses several
challenges for banks and the Reserve Bank of India alike. The standardized approaches
have already been implemented in India and all the commercial banks have migrated to the
standardized approach under Basel II framework as of March 2009. Migration to the
Advanced Approaches is important for larger banks because it involves adoption of more
sophisticated risk management systems. Moreover, there are reputational issues too if large
banks continue with standardized approaches. However, the implementation of the advanced
approaches raises several issues relating to development of human resource skills,
technology upgradation, branch interconnectivity, availability and management of historical
data, robustness of risk management systems, etc. Though RBI has set an indicative time
schedule for implementation of the Advanced Approaches, banks' response has not been
encouraging so far. It is high time for larger banks to seriously upgrade their systems and
skill sets and migrate to the Advanced Approaches.
(ii) Migration to Basel III
(a) Capital
11. Basel II was designed because its predecessor i.e. Basel I was considered risk
insensitive and too preliminary to cope up with the rapid developments in the financial sector
resulting in substantial regulatory arbitrage. The basic purpose of Basel II was to leverage on
the risk management systems of internationally active banks and use that for enhanced risk
management architecture and, in the process, have better measurement of capital
requirements. It is ironical that when the crisis took place, Basel II was either not
implemented or just implemented in the jurisdictions. And yet we have had to leapfrog and go
in for enhancements under Basel II.5 and Basel III. Under Basel III, an assessment of Indian
banks in terms of capital requirements has revealed that, notwithstanding some issues with a
few individual banks, the system, as a whole, is very well capitalized and the transition to the
revised capital norms of overall capital adequacy, Tier I component or equity component
would be smooth. The stress point, however, would be that banks will be required to adjust
the unamortized portion of Pension and Gratuity liabilities in the opening balance sheet on
April 1, 2013 on transition to IFRS.
12. Going forward, the capital requirement on account of increased coverage of risks
would not be so material for Indian banks as either those activities are not allowed
(i.e. re-securitisation) or their magnitude is quite small (i.e. trading book).
13. However, capital requirements, including equity, would be substantial for supporting
the high GDP growth and the fact that Credit to GDP ratio, which is currently quite modest at
about 55 per cent, is bound to increase substantially on account of structural changes in the
economy i.e. Financial Inclusion program, increase in loan requirements from more credit
intensive sectors such as manufacturing, infrastructure, etc.
14. The large equity needs, though over an extended time frame, would put downward
pressure on the banks' RoE. While the higher capital requirements would bring down risks in
the banking sector and eventually investors would recognize the lower risks and be willing to
settle for a lower ROE, in the short term, the only answer is raising productivity.
15. RBI and banks would be estimating the capital requirements under Basel III once
our guidelines for implementation of Basel III are finalized. While implementing Basel III, our
dilemma is (a) where our capital regulations are more stringent, should we continue with the
more stringent norms? and (b) should we adhere to the extended timetable or step up the
implementation schedule, given the fact that the banking system would be comfortable at the
starting point i.e. at transition?
16. Other areas that need strengthening include securitization related regulation, market
risk management tools and improvement to the Supervisory Review and Evaluation Process
of Pillar II of Basel II as per the Basel III enhancements.
(b) Liquidity management
17. The Financial Stability Report (FSR) of the Reserve Bank of India for the half year
ended June 2011 has expressed concerns over growing reliance of banks on wholesale
funding/ market borrowing to fund assets. One reason for such reliance could be the low
growth of deposits not commensurate with the credit growth. Such reliance, however, could
prove disastrous as evidenced during the crisis as the wholesale funding sources can dry up
quickly. Banks, therefore, have to factor this in their liquidity management. There, however,
remains an issue under Basel III about the extent to which SLR holdings can be taken into
consideration for the purpose of calculating the liquidity ratios. As the SLR holdings are
required to be maintained on an ongoing basis, these would technically not be reckoned for
liquidity purposes. However, it may be reasonable to reckon, under stress conditions, at least
a part of the SLR holdings in calculating the liquidity ratio, as the SLR holdings are primarily
government bonds against which the Reserve Bank provides liquidity. Further, the major
challenge for Indian banks in implementing the liquidity standards is to develop the capability
to collect the relevant data accurately and granularly and also to formulate and predict the
liquidity stress scenarios with reasonable accuracy and consistency. Given that Indian
markets have not experienced the levels of stress that global markets were subjected to,
predicting stress scenarios is going to require a qualitative judgemental call.
(iii) Shadow banking system - greater consistency in regulation
18. Another important regulatory challenge is ensuring "greater consistency in regulation
of similar instruments and institutions performing similar activity" to prevent or contain
regulatory arbitrage. In the case of systemically important non-deposit taking NBFCs
(NBFCs-ND-SI), a gradually calibrated regulatory framework in the form of capital
requirements, exposure norms, liquidity management, asset liability management and
reporting requirements has been extended, which has limited the space for regulatory
arbitrage as also their capacity to leverage. Given the increasing significance of the sector,
the supervisory regime for the systemically important NBFCs will need to be strengthened
further for a more robust assessment of the underlying risks. A Working Group under the
former Deputy Governor, Ms. Usha Thorat on NBFCs has, inter alia, examined the issues
related to the regulatory gaps and arbitrage opportunities that exist in the system, and has
given recommendations for addressing these issues as well as for enhanced disclosure
requirements and improved supervisory practices, etc.
(iv) Other issues
19. The Indian banking system has a modest leverage which provides comfort. The RBI
has also been enhancing and fine-tuning its supervisory processes on an ongoing basis and
based on the evolving financial scenario. A revised framework for monitoring of financial
conglomerates has been rolled out since 2009. The Financial Stability and Development
Council (FSDC) has also been activated under the aegis of the Government of India for
system level monitoring of build-up of risks and instability, specifically, risks emanating
from the Systemically Important Financial Institutions (SIFIs) including the financial
conglomerates. This is also expected to enhance coordination among the financial
regulators. However, enterprise wise risk management processes need to be
implemented / strengthened in the financial conglomerates and SIFIs.
(v) Structural changes
(a) Financial innovation
20. The crisis has also raised the issue of financial stability vis-à-vis financial innovation
- in other words, the question of the "social optimality" of financial innovations. One of the
main reasons why India escaped the adverse impact of the crisis was a calibrated approach
to financial innovation. However, we as regulators and supervisors need to guard against
stifling financial innovation while at the same time remain cautious about the objective and
purpose behind the new and complex financial products that are proposed or introduced by
the industry. This is particularly relevant for a country like India as its resilience in the face of
heavy financial turbulence can be quite limited and as no social safety nets are available.
These concerns shape RBI's approach to financial innovation. Banks have to be cautious
about the "social usefulness" of new products and should have appropriate controls in place
to ensure against mis-selling through robust "suitability and appropriateness" checks. Several
far-reaching measures have been taken recently in terms of allowing new products such as
Interest Rate Futures, Currency Futures, and Repo in corporate bonds, etc. Such products
are new for the Indian market and an assessment of their impact on other markets,
institutional behaviour and system as a whole is critical. Going forward, a key focus area
must be designing of robust market infrastructure and strengthening the systemic monitoring
framework for these new markets.
(b) Financial holding companies
21. During the last decade, India has witnessed growth and evolution of financial
institutions into large financial conglomerates expanding their presence in multiple
nonbanking financial activities. In this backdrop, the issue of the nature of corporate form
adopted by financial groups in India has acquired relevance from two distinct, though
interrelated, perspectives - one, efficient corporate management within the groups addressing
the issues of growth, risk management and capital requirements of the Group; and two, the
degree of regulatory comfort with different models, particularly in regard to the concerns
relating to contagion risks.
22. A Working Group set up by the Reserve Bank in this connection has recommended
pursuing Financial Holding Company (FHC) model as the preferred model, as it enables,
inter alia, de-risking the banks to a certain extent from the perspective of "holding out" risks
of the Group and freeing the bank management from the responsibility of managing the
subsidiaries and other affiliates. This structure also facilitates better regulatory oversight and
neater resolution. There are, however, numerous challenges in implementing the FHC model
in India. The implementation of this model would require a new legislative framework,
providing the right incentives to the existing financial conglomerates through appropriate tax
treatment and resolution of strategic and public policy issues in the case of public sector
banks.
(c) Changing banking landscape: subsidiarisation of banks
23. One of the key takeaways of the global crisis is the appreciation and
acknowledgement of the benefits of subsidiarisation vis-à-vis branch presence of foreign
banks. Reserve Bank has already taken steps in the direction of encouraging foreign bank
presence in subsidiary form. The draft paper put out in this regard has suggested making the
subsidiary route more attractive by providing near national treatment to the wholly owned
subsidiaries of foreign banks. Presence of foreign banks in subsidiary form will generate
greater competition for the Indian banks as this route will open up nearly equal opportunity to
foreign banks in business expansion within India.
(d) Adoption of IFRS
24. There are certain issues that need to be addressed in implementing the
convergence with the IFRSs. First, the very crucial IFRS 9 relating to Financial Instruments is
still evolving and the final standard is unlikely to be available soon. Thereafter, the Institute
for Chartered Accountants (ICAI) will need to promulgate the converged standard for India.
This presents a moving target given the short time available for convergence with IFRS.
Converging to the standards would require considerable skill upgradation and modification in
the IT systems of banks. The Reserve Bank has constituted a Working Group to address the
implementation issues and facilitate formulation of operational guidelines for the
convergence.
(e) Revamping financial legislation
25. Evolution of legislative framework is an interesting area. Laws are made keeping in
mind the prevailing circumstances. However, if the circumstances change, the legal
framework can become inadequate. This is more so in the financial world because the pace
of change is very fast. Currently in the financial sector, we have about 60 Acts and multiple
rules and regulations. The incremental changes made to these Acts over a period have
made the laws ambiguous and complex. Government has taken an initiative by setting up a
Financial Sector Legislative Reforms Commission (FSLRC) which seeks to rewrite and
streamline the financial sector laws, rules and regulations to bring them in harmony with
India's fast growing financial sector.
B. Challenges in meeting the specific needs of the economy
26. Indian economy is one of the fastest growing economies of the world. The economy
with its varied geography and demography has specific requirements in order to traverse to
the next orbit and attain its full potential. Banks have to gear up to meet such requirements
by redesigning their business strategies. A few of the most important requirements of the
economy are (i) Financial Inclusion (FI), (ii) Infrastructure Financing and (iii) Financing of
housing and real estate.
(i) Financial inclusion (FI)
27. It is estimated that despite the widespread expansion of the banking sector, about
40% Indians still lack access to even the simplest kind of formal financial services. Such an
extent of financial exclusion can severely retard the Indian growth story, both by blocking a
major portion of the Indian population from participating in the economic mainstream and by,
possibly, generating social tensions. As such, moving towards Universal Financial Inclusion
is both a national commitment and a policy priority. RBI and the Government of India have
taken several initiatives in this direction such as mandating opening of "no frills" accounts
coupled with provision of small overdraft facility, introduction of a General Credit Card (GCC),
relaxation of KYC norms for small value accounts, allowing general permission for opening
branches in Tier 2 to Tier 6 centres with population of less than 1,00,000, allowing use of
Business Facilitator (BF) and Business Correspondent (BC) models, etc. in providing
financial and banking services. Despite some improvement as a result of these initiatives in
recent years, real financial inclusion still eludes us and major challenges remain. First of all,
in the absence of a proper assessment of the extent of financial exclusion, initiation of
appropriate policy responses is difficult. There is, therefore, a need to conduct specific
survey or expand the scope of the decadal census for gathering information relating to
financial inclusion / exclusion. Then, there is the issue of high operating cost of small
transactions and difficulties in reaching out to far flung areas. Most importantly, banks need
to perceive Financial Inclusion as a profitable, commercially viable business and not as an
obligation. This can be attained through product innovation, use of technology for lowering
cost of transaction and cross selling of products and services after thoroughly understanding
the rural markets. Mobile banking has tremendous potential in this respect. Effective
leverage of Information and Communications Technology (ICT) solutions, duly simplified, and
use of products such as smart cards, biometric handheld devices, mobile and basic level
ATMs, etc. can aid cost reduction. Cultural and attitudinal changes at grassroots, especially
at the level of branches are needed to impart organizational resilience and flexibility.
Financial literacy and credit counselling will create the right conditions for financial inclusion.
28. There is also a need to improve the absorptive capacity of financial services by
providing basic infrastructure such as health, water, sanitation and education which can lead
to faster income growth and increase in non-farm based activities in rural areas and lead to
increase in demand for credit. Systems of reward and recognition for the personnel initiating,
ideating, innovating and successfully executing new products and services in the rural areas
would also give financial inclusion the much desired fillip. Ours is a bank led model for
financial inclusion because in our view only banks can provide a comprehensive inclusion
programme - deposit and loan products and remittance facilities. Hence banks bear very
large responsibility in making the financial inclusion programme a success.
(ii) Infrastructure financing
29. India's infrastructural financing needs are not only huge but also vital. The targeted
annual spend on infrastructure during 2007-12 is about USD 500 bn which is estimated to
double in the next five year plan (USD 1 trillion during 2012-17). Shortfall in infrastructure
financing, according to an estimate, would cost about 4% of GDP every year1 which is too
costly for a growing country like India. Banks, traditionally, have been the major source of
infrastructure financing and their exposure to infrastructure is already high at 17 per cent.
Infrastructure projects involving long term funding plans have, however, severe implications
for the asset liability management at banks. There are some alternatives to bank financing
such as development of corporate bond markets, Infrastructure Debt Funds etc. The
challenge before banks in the fast evolving landscape is to realign their position in meeting
the infrastructure finance needs, at the same time, however, not significantly increasing their
risks. Take-out financing could be one option in achieving this balancing act. Government
and RBI have recently come out with a structure for Infrastructure Debt Funds (IDFs) which
would facilitate take-out financing, development of the corporate bond market etc.
(iii) Financing of housing and real estate
30. Financing of housing and real estate is another challenging area for banks. With a
high rate of population growth, coupled with increased urbanization and growing incomes,
there is a tremendous business opportunity for banks to participate in this segment. The
emergence of demand for housing finance is expected to be the key driver of bank credit in
future. However, real estate, owing to its imperfection in terms of information asymmetry and
opacity, poses great challenges and banks need to tread with utmost caution and should
avoid falling prey to irrational exuberance. Real estate is highly sensitive and prone to easy
build up of bubbles, which could be mistaken for growth momentum. The global crisis bears
a striking testimony to the disastrous impact the excesses in real estate sector could pose to
the financial system and banks have to resist the lure of quick but risky returns.
C. Challenges in correcting the fault lines
(i) Asset quality
31. Non-performing Assets (NPA) have caused some concerns. While the rise in NPAs
could partially be attributed to the adverse impact of the global financial crisis, the aggressive
lending stance of banks during the preceding boom period as also inadequate due diligence
and laxity in monitoring of the loan accounts are also responsible for deterioration in the
asset quality. This has been so, especially in case of retail loans. While the gross NPA ratio
declined from 3.30 % at end March 2006 to 2.25% at end March 2011, mainly due to a
commensurate increase in gross advances; the absolute amount of gross NPAs increased
by Rs.46,669 crore (an increase of 91%) during FY 2005-06 to FY 2010-11. As such, the
NPA stock has risen consistently. Slippage ratio of the banking system, defined as fresh
accretion to gross NPAs to opening balance of gross standard advances, which had shown a
declining trend from FY 2005-06 (1.9%) to FY 2007-08 (1.8%), abruptly increased to 2.18%
in FY 2008-09 and 2.21% in FY 2009-10. At system level, new accretion to NPAs has been
much faster than the reduction in existing NPAs due to lower levels of upgradation and
recoveries. Also, despite write-offs, gross NPAs have continued to rise significantly.
32. The table below tracks the movement of stock of gross and net NPAs of the banking
system during the period March 2006 through March 2011.
33. It may be comforting to take refuge under net NPA figures but the comfort is
misplaced. Banks need to, not only utilize effectively, the various measures such as CDR
mechanism, One Time Settlement schemes, Debt Recovery Tribunals, provisions of the
SARFAESI ACT etc. put in place by RBI and the Government of India for resolution and
recovery of bad loans but also have to strengthen their due diligence, credit appraisal and
post sanction loan monitoring systems to minimize and mitigate the problem of increasing
NPAs. Overall economic growth in the last decade or so, coupled with higher disposable
incomes have led to an exponential growth in retail spending. As the efforts directed towards
financial inclusion take off, the bankable population will see further rise. This would require
that delinquency risks and quality of portfolio are carefully managed by banks. Adherence to
the provisioning requirement, building countercyclical provisions and holding countercyclical
capital buffers in good times can, to some extent, insulate banks from excessive default
stress during crisis situations.
(ii) Consolidation
34. Mergers and acquisitions (M&A) as a means of inorganic growth are increasingly
being used the world over to undertake restructuring of leading business enterprises. It is
followed as a part of the strategy to achieve a larger size and faster growth in market share
and reach, and to become more competitive through economies of scale and scope. India
does not have larger banks to finance its huge infrastructural needs and large industrial
projects. The structure of the banking system as recommended by the Narasimham
Committee II consisting, along with medium sized and smaller banks, of a few large
international banks, would not only meet the financing needs of infrastructure and large
projects and provide the economies of scale and scope but also leverage the country's
image as a financial destination and enable Indian banks to compete globally in terms of fund
mobilisation, credit disbursal, investment and rendering of financial services. This could be
attained through consolidation. However, while encouraging / promoting the consolidation
route, the need for competition within the domestic banking sector should not be overlooked
nor the risks and challenges that emanate from the presence and operations of large
systemically important financial institutions be ignored. While nobody knows what the
optimum size in terms of largeness is, one thing which is very clear is that banks should
refrain from, and regulatory dispensation should not permit, building complex structures.
(iii) Corporate governance deficit
35. Several studies have highlighted the direct relationship between good governance
standards and the performance and efficiency of an entity. This is all the more true in respect
of banks, which, in their fiduciary capacity deal with public money on one hand and on the
other, enjoy government /central bank support due to their centrality in the overall financial
system. The recent crisis has also amply demonstrated how weak governance framework
contributed to the build up to the crisis through excessive risk taking. Transactions in risky
and complex products which were barely understood, neither by the financial entities nor the
customers, was another contributing factor. While over the last one decade, the governance
requirements have been considerably enhanced in India, good governance has to be a
continuous and ongoing process. In India we had the "derivatives" episode recently which
was a case of inadequate application of "suitability and appropriateness" requirements and,
consequently, was a case of governance deficit. As such the Board of Directors and the
senior management have a great oversight responsibility in ensuring that the respective
banks lay down robust compliance culture and corporate governance framework which is
reviewed periodically for its efficacy and efficiency.
(iv) Information asymmetry
36. Information asymmetry in a multiple banking scenario is a serious issue. A
framework for pooling and sharing of credit information amongst banks had been put in place
so as to enable banks to streamline their credit appraisal framework and also to instil
discipline among the defaulting borrowers. The utility of such data, however, hinges
inexorably, on its integrity and timeliness. Lapses in sharing of information defeats the very
purpose of such arrangements. Unfortunately this arrangement has not worked. Banks
should strive to make this work. Hopefully with licenses granted for additional Credit
Information Companies, we expect the system to evolve a robust information sharing
arrangement and further the development of the banking system.
(v) Product pricing
37. Costing of banking products is an issue which has largely been escaping serious
debate. Proper and fair pricing of risks and of banking products is essential from risk
management and customer service perspecti