union candidates put their public finances in order prior to participation. the stability and growth pact has clarified what will apply once monetary union has begun. the pact can be said to consist of two parts : a surveillance mechanism for detecting at an early stage that a country is starting to have budgetary problems and is in danger of incurring an excessive deficit, and a mechanism for sanctions on errant countries. the first mechanism covers all the eu countries and requires them to present a fiscal policy programme. the sanctions mechanism, on the other hand, applies only to countries in the euro area. the purpose of the pact is to strengthen political mechanisms at union level so that budget discipline is permanently maintained. there has been underlying concern that otherwise a country might be strongly tempted to shift a part of the adjustment costs for consolidating government finances onto the other countries. the pact requires every member state to aim for a medium - term budgetary position close to balance or in surplus. if the 3 per cent limit is exceeded, the commission and the ecofin council are to follow a specified plan of action : examination, opinion, recommendation, publication and, as a last resort, sanctions. the pact has been constructed with a view to generating so much pressure on member states to put government finances in order that sanctions will never be necessary. a knotty problem when constructing the pact was how to make the requirements sufficiently strict without placing undue restrictions on national fiscal policies. this is all the more important when monetary policy is no longer available at national level, so that the task of adjustment falls more heavily in practice on fiscal policy. oecd estimates indicate that in a “ normal ” economic downturn, the cyclical budget balance in eu countries weakens by 1 - 1. 5 per cent of gdp. some budgetary discretion is therefore needed so that there is a margin for automatic stabilisers to act when activity is falling. the conclusion is that the trade - off seems reasonable but the pact does make it necessary to achieve a balanced budget or a surplus relatively soon. under these circumstances, the swedish government ’ s ambition to establish an annual budget surplus of 2 per cent over the business cycle is commendable. fiscal policy accordingly faces new challenges and it is not all that easy to tell just what may happen. when monetary policy ceases to be a national instrument, fiscal policy will have to play a greater part in stabilisation policy. at the same time, the scope for budget policy will be curtailed in

assets ”. but have we even attempted to create assets in its true sense out of these resources? ( b ) what have we done to keep up the levels of motivation among our employees? ( c ) have we gone – at least thought – beyond traditional aspects of rewards and incentives? ( d ) is our hr environment conducive to promoting growth of the institution as also that of its personnel? intellectual capital leading to innovation 8. innovation leads the way in all industries and banking is no different. a few decades back, this statement may not have held any water ; but now this holds the key to success. innovation in banking takes 3 dimensions – product, technology as also the process. innovation needs organizational support particularly from the top management, to succeed. 9. with regard to innovation, satya nadella, ceo, microsoft, in his first letter to the microsoft employees, observed : “ while we have seen great success, we are hungry to do more. our industry does not respect tradition – it only respects innovation ”. this is the importance that successful companies give to innovation. 10. i like to cite a few successful examples from industries other than banking. in the news recently is the case of whatsapp! it is amazing to note that a company consisting of 55 persons could acquire an intrinsic value of $ 16 billion in a matter of a few years. let us understand the innovative capability of the product. it has managed to bring together 400 million users with the help of a smart phone and a simple business plan. 11. why can ’ t such products be emulated in the banking sector? are we making available a sound innovation framework, including adequate organizational support? let us introspect. i am sure it is not easy but should we not at least make the right attempts? 12. we need to also look at customer oriented innovation. most of the innovative steps taken by banks in the recent past have a bearing on the profitability of banks, on their own operational improvements, better housekeeping and the like. how many of us can look back and identify the innovations which have resulted in customer delight, or if not, at least better customer satisfaction? i am reticent of challenging you openly with this question as i am a little skeptical about the outcome. but let us at least begin, now that banks are looking beyond the cbs. bis central bankers ’ speeches data quality – standardisation – the new normal? 13. at the base of all information processing is data