##udential measures look out of date. we are told that “ this time is different, ” and that we should embrace these new ways of thinking. often, these new ways of thinking disguise excessive optimism, as exemplified in the two episodes we have discussed. so, beware. secondly, in the process of the buildup of imbalances, there are often signs of anomalies. in the past, these anomalies were often ignored as being isolated and having no macro significance, or explained as rational choices, such as investment for future returns. but if these anomalies are found to coexist with other signs of excessively optimistic investor forecasts, these are likely signs of the buildup of financial imbalances. this point is especially relevant if the signs are found saliently in property markets, which usually move slowly. thirdly, timely information about excessive investor optimism is of utmost importance in this regard. price - to - rent ratios in property markets are one indicator of investor sentiment. whereas information about price - to - earnings ratios is easily available in stock markets, corresponding ( properly quality - adjusted ) price - to - rent ratios in property markets are not easily available. this has, and still does pose a serious problem for macro - prudential policy, especially for emerging economies where property markets are becoming increasingly important. to have timely information about proper price - to - rent ratios, or at least price indexes that are reliable and internationally comparable, is not only important for assessing the magnitude of financial imbalances that need rectifying, but also vital to communicate with the public, both inside and outside of the country. in this respect, it is highly recommended that price indexes be constructed consistent with prospective united nations recommendations ( due next year ) on residential property price indexes, and that these indexes be published regularly in a timely manner. the japanese price - to - rent ratios presented before are calculated from large data sets using hedonic regression methods, and are available monthly with approximately two weeks ’ lag. fourthly, if investors are excessively optimistic, a modest increase in capital requirements and leverage restraints may not be sufficient to curb such unwarranted optimism. the case in point is the increase in banks ’ new stock issues in japan in the late 1980s and the dramatic decline of their leverage ratio during the buildup of the financial imbalances. this point is also relevant in contemplating maximum loan - to - value ratio requirements as macro

wealth funds be permitted to take a controlling stake of 40 percent. asset quality 13. during the quarter ended december 2013, banks collectively held loan provisions of about rupees one lakh crores, an increase of 13 percent over the year, indicating that loan asset quality of banks in india deteriorated considerably the trend of y - o - y growth in gross non - performing advances ( gnpa ) outstripping the y - o - y growth of advances, that started from the quarter ended september 2011, continues although the gap in the growth rates is narrowed 5. the psbs continued to register the highest level of stressed advances at 11. 3 per cent of the total advances as at end march 2014, followed by the old private bank at 5. 8 per cent. though agriculture sector showed the highest gnpa ratio the industry sector showed distinctly high level of restructured standard advances, resulting in the stressed advances of the industry sector reaching 15. 6 per cent followed by the services at 7. 9 per cent as at december 2013. there are five sub - sectors, namely, infrastructure { which includes power generation, telecommunications, roads, ports, airports, railways ( other than indian railways ) and others infrastructure }, iron and steel, textiles, mining ( including coal ) and aviation services had significantly higher level of stress and thus these sub - sectors / segments were identified as “ stressed ” sectors in the banks ’ lending portfolios. the share of these five stressed sub - sectors to the total advances of the scbs is around 24 per cent. infrastructure has the highest share at 14. 7 per cent in the total advances. among the bank - groups, these five sub - sectors have the highest share at 27. 3 per cent in the case of psbs. 14. it is widely accepted that the economic slowdown has affected the asset quality of banks adversely though the impact is not similar across bank groups. sector - wise and their sizewise analysis of asset quality shows that the gnpa ratio of psbs across the sectors and their size are significantly higher than the other bank - groups. how do we face up to the challenge of deteriorating asset quality of banks? though analysts have often pointed out that the poor asset quality of the banks, to a great extent, could be attributed to the not so the system level gross non - performing advances ( gnpa ) of scbs as percentage of total advances, declined to 3. 9 per cent in march 2014 from 4. 2 per