is usually an item of public disclosure, there is a corresponding need for corporates too to make adequate disclosures regarding their risk exposures, specially to derivatives and foreign exchange. this would enable the banker to assess the risk profile of the corporate accurately and to evaluate the appropriateness of various financial products on offer. while these disclosures could be made mandatory through the accounting standards – on which, i understand, icai is working – it would be desirable if the corporates adopt such disclosures voluntarily, sooner than later, in their own as well as the system ’ s interest. it is useful for the bankers to track the changing dynamics of the pattern of corporate financing. the equity base of the corporate sector, relative to debt, seems to have increased, and many corporates are currently cash surplus, presumably to meet their investment commitments. besides, the corporates also have access to other funding sources, especially external commercial borrowings and domestic and global capital markets. the development finance institutions have substantially got subsumed in the banking sector and banks are increasingly functioning as universal banks. banks ’ lending to households, be it through consumer credit or housing loans, has been increasing in the recent past along with increases in lending to priority sectors. it may, therefore, be worthwhile for banks, especially those with long history, to review their systems and procedures for lending and extending other forms of support to the corporates. an area of concern, in terms of public perception, is that there is under - pricing of credit risk for private sector corporates while there could be overpricing of risks in lending to agriculture as well as small and medium enterprises. there is merit in reviewing the current procedures and processes of pricing of credit, perhaps through a well structured segment - wise analysis of costs at various stages of intermediation in the whole credit cycle. we also notice that several corporates are active in treasury management. hence, they need to be well - equipped to identify, measure, manage and control the risks especially when, often, they are counterparties to the treasury transactions of the banks. regulatory framework for banks is gradually encouraging banks to assess and manage the risks on their own while regulation focuses on the adequacy and robustness of the systems in vogue in the banks for the purpose. the share of corporates in the lending by the banks, however, does not reflect 2 / 3 the full range of the banks ’ exposure to them as it does not capture significant exposure to corporates through investments

universal banking and above all, urging the banks and corporates to put in place sound risk - management systems – particularly for market risks. in 2003, rbi issued a fair practices code to be followed by the banks which aimed at making them more responsive to the borrowers and enhancing the confidence of borrowers in the banks as a source of funds. the procedure for declaring borrowers as " wilful defaulters " has been streamlined so as to afford full opportunity to the corporates to present their viewpoint before so classifying them. recent developments that warrant a careful redesign of the bank - corporate relationship include financing by multiple banks, through several instruments including investments, and access to a wider choice of sources of finance for corporates such as capital markets and external financing. since such choices nudge towards transaction - based banker - customer relationship, these could impinge on the access to the information required by the bankers for financial assessment as also on the ability of corporates to get an assured and appropriately priced financial package. perhaps there is a need for supplementing transaction - based relationship between banks and corporates with a more active and meaningful dialogue between them. i am sure such meetings do take place even now, but it is worth exploring whether the process needs to be strengthened. in this regard, there may be an advantage in industry bodies like ficci and iba embarking upon a review of the existing practices of dialogues between the banks and their corporate borrowers to ensure and enhance trust, transparency and timeliness – the three " t " s of banking. such a review could perhaps also promote healthy competition amongst banks and add to the comfort of the corporates too. the corporate debt restructuring mechanism ( cdrm ), which became operational since march 2002, is another platform for banker - corporate interface. its efficacy is evident in the fact that well over one hundred cases have been approved for restructuring under this system. the cdrm was reviewed recently by a special group and we expect to bring out, in a couple of weeks, the revised operational guidelines for improvements in the cdrm to make the restructuring smoother for genuine cases. another area of common interest to the banks and the corporates is the risk management. the lenders and investors have an obvious interest in accurately assessing a firm ’ s risk - management performance, apart from its underlying financials, so as to understand the risks assumed by the firm and those it has hedged or transferred to others. while the banks ’ risk exposures and their riskmanagement strategy