broader portfolio level was not exhibiting any major signs of stress, the consistent high credit growth reported in the above segments warranted regulatory intervention. accordingly, certain quantitative and qualitative measures were undertaken from a macro - prudential perspective. as regulators, we would want to ensure continuous vigil to mitigate risks emerging from both within and the periphery of the financial eco - system. for example, the digital lending guidelines issued by the reserve bank envisage that regulated entity undertakes the due diligence required for lending decisions even when the loan is being sourced through a lending service provider ( lsp ). the increased reliance of banks / nbfcs to identify and onboard borrowers through fintech partners should not mean lowering of underwriting standards and improper pricing of risks. as a regulator and supervisor, we are examining the prevailing models and practices to see how best they could be leveraged for effective credit delivery, without compromising on risk management and prudential credit underwriting standards. concluding thoughts i would like to stress here that what has been shared so far is an illustration of some of the key areas of regulatory focus. at the same time, there are several other aspects which continue to be on the regulatory radar. i am sure, through a collective, consultative and collaborative approach, it would be possible to frame appropriate set of policy measures to address the current and emerging challenges. through this process, we should be able to build a stable and resilient financial system which shall meet the emerging needs of our country in an effective manner. to conclude, let me emphasize once again that even as the financial landscape evolves and transforms, the underlying principles of good governance, robust risk management, effective compliance, customer protection and responsible business conduct will be increasingly relevant. a robust culture within the organisation which delivers financial services while embracing these principles will stand the system and the institutions in good stead in the long run. 6 / 7 bis - central bankers'speeches namaskaar!! the inputs provided by pradeep kumar, peshimam khabeer ahmed and pramanshu rajput are gratefully acknowledged. 1 rbi speech : no more a shadow ( of a ) bank - available at https : / / rbi. org. in / scripts / bs _ speechesview. aspx? id = 1416 2 changing paradigms in the financial landscape - available at https : / / rbi. org. in / scripts / bs _ speechesview. aspx? id = 139

management, governance, transparency and disclosure standards thereby enabling depositors, investors and counterparties to take a more informed decision. the intended consequences of the regulatory reform measures are all too well known to need repetition before this knowledgeable audience. bis central bankers ’ speeches unintended consequences of reforms 8. it is obvious that the new regulatory and supervisory framework that we are putting in place now have some unintended consequences that are likely to entail additional economic costs. an underlying tension around the trade - off between financial stability and economic growth persists despite impact assessment studies showing results to the contrary. i would like to touch upon some of these issues with a particular focus on the impact on emerging markets. i ) impact on gdp growth although, an ex - ante assessment of the economic impact of regulatory reforms is difficult ; studies conducted by various international agencies indicate different magnitudes of impact. the bcbs ( 2010 ) estimated that the basel iii capital and liquidity charges would reduce the steady state level of economic activity by 0. 6 per cent in total or 0. 08 per cent annually if spread over the eight year transition period. mag of bis in 2010 covered 17 industrialized countries to conclude that the lending spread would increase by 15 bps by 2015 in response to a 1 % increase in capital over 4 years. iif which took a view ( 2010 ) of europe, us & japan concluded that a 2 % increase by way of capital and liquidity would translate into increase in the lending spread by 132 basis points. another study ( 2012 – 19 ) by iif indicates a negative impact of 0. 40 %, 0. 30 % and 0. 10 % on the annual growth for europe, japan and the us respectively. while the differences in outcomes could be attributed to the differences in methodology, the direction of impact is nonetheless clear. the economies need to brace up to the fact that the new regulations would have an adverse impact on the economic growth. the combination of ( a ) increased capital requirements, particularly in the common equity element of tier 1 capital and capital buffers and ( b ) minimum liquidity requirements, are likely to reduce the return on equity for banks. it is unclear how different banks will address the situation but the options include : reduction of rates on retail deposits ; reduced staff compensation ; and increased margins on products. reduction in retail deposits rates can have two consequences. first, it can result in increased disintermediation. second, they can even affect the overall saving rate of