untreated, whether sustainably or not. for example, bis central bankers ’ speeches of 98, 000 personal dwelling home ( pdh ) accounts more than 90 days in arrears at end june, fully 74, 000 – or three out of every four – were not yet in an arrangement. why have the banks been so slow in acting? it may be, as many have suggested, that the delay in correcting the legislative defect identified by the dunne judgement did represent a delay – though it should not have deterred non - repossession action. the moratorium, and the ccma restrictions designed to prevent harassment by debt collectors, likely have contributed to some delay, but have also been used as excuses. in any event, the moratorium and other ccma rules have now been streamlined in such a way as to retain sufficient protections for distressed borrowers – a legitimate and important objective – while generating little or no obstacle to efficiently organised collection procedures. the legislative defect identified in the dunne judgement has also eventually been corrected, as was recommended by the central bank. more important has been the fact that the task required a much more focused and effective organisational effort at scale than the banks at first realized, a deficiency which they have been progressively overcoming, since we started to audit and critique their procedures more intensively in 2011. i believe that there is also a gap between the analysis of the central bank and that of some of the banks with regard to the need for clarity and predictability about the solutions being proposed. the central bank wants to be sure that there is sufficient clarity about the arrangement, for example in regard to the treatment of the borrower ’ s liability for the shortfall in a loan following an assisted sale or repossession, or for the warehoused part of a split mortgage. some of the banks have expressed the opinion that a degree of uncertainty about how these elements will be treated could help ensure that the bank recovers as much as possible. the central bank believes to the contrary that, with such a widespread systemic problem of debtor distress, greater clarity on what is residually owed in these circumstances is safer for the lender in guarding against any erosion of the debt servicing culture, as well as helping a broader restoration of household confidence which will help the wider economic recovery and through that boost loan recoverability. in particular, the central bank regards as unwise the creation of a situation where, because of such uncertainty, the lender and borrower hold inconsistent

##equacy ratios of scbs have further improved in september 2021 from their levels in june 2021. banks have also been prudent in raising capital. profitability metrics of several banks are also at highest levels in several years. the improved parameters partly reflect regulatory relief provided to banks during covid - 19 as well as fiscal guarantees and financial support given by the government. going forward, there are risks and challenges which require serious introspection and action on the part of the banking system. 18. first, the covid - 19 episode provides a real - life experience to take a fresh look at certain aspects of existing prudential and regulatory norms for financial entities regulated by rbi. certain concerns have re - emerged from the crisis which warrant our attention. most importantly, we are faced with the question of capital and provisioning buffers of banks, their adequacy and resultant usability during a crisis. i would thus strongly urge the banks to focus and further improve their capital management processes with a forward - looking, scientific and prudent approach. the key point is to envisage the capacity for loss absorption as an ongoing responsibility of the lending institutions. it is expected that banks will exhibit prudent risk - taking behaviour and use their capital efficiently. 19. second, good governance is a necessary condition for having well - functioning, strong and resilient financial institutions. banks have the privilege of raising deposits from the public, which also puts the onus on them to conduct their business in a very responsible manner. the board of directors carry the responsibility of being guardians of the trust that depositors have reposed in a bank. a bank ’ s responsibility towards depositors should, therefore, be weighed against its responsibility towards shareholders of the bank. to ensure good governance, the reserve bank has high expectations from the oversight role of the board, its composition, directors ’ skill profile, strong risk and compliance structure and processes, more transparency and a robust mechanism of balancing various stakeholder interests. thus, business priorities need to be complemented with responsible governance and ethical actions. 20. third, banks should ensure that their business models and business strategies are conscious choices, following a robust strategic discussion in the board, instead of being driven by mechanical ‘ follow the market ’ approach. in their endeavour to grow, banks should avoid herd mentality and look for differentiated business strategies. at the rbi, we have started taking a closer look on the business models and strategies of banks. certain banks had