of financial instability. although some of the instability may have been transitory, the analysis suggests that this market should be closely monitored and that authorities may need to rethink the role of cocos, should they prove unable to provide for a smooth bank recapitalization. this brings me to my final remark. there is a concrete risk of losing the reform momentum and conceding ground to calls that are not always disinterested and to mounting pressure to roll back the existing regulations. as recently pointed out by the international monetary fund, this pressure should be resisted. we need to learn from the past. each and every time either regulation or supervision has become lax, excessive risks have been taken and leverage has increased, often leading to abrupt and recessionary swings in the financial cycle. so, during economic expansions we should be aware of the possible illusory perception of things looking more benign than they actually are. to conclude, central banks have emerged from the trial of the financial crisis with a strengthened responsibility in the area of financial stability, which needs to be honoured. high quality analyses and meetings like this one represent a unique opportunity to compare experiences and continue the debate, thus helping policy makers to carry out their mandate more effectively. designed by the printing and publishing division of the bank of italy

in the country along sound lines. the board for regulation and supervision of payment and settlement systems ( bpss ), set up in march 2005 as a committee of the central board of the reserve bank, is the apex body for giving policy direction in the area of payment and settlement systems. real time gross settlement ( rtgs ) was operationalised on march 26, 2004. its usage for transfer of funds, especially for large values and for systemically important purposes, has increased since then. with introduction of rtgs, whereby a final settlement of individual inter - bank fund transfers is effected on a gross real time basis during the processing day, a major source of systemic risk in the financial system has been reduced substantially. a risk free payments and settlements system in government securities and foreign exchange was established by the clearing corporation of india limited ( ccil ), which is set up by banks. ccil acts as the central counter party ( ccp ) for all the transactions and guarantees both the securities and funds legs of the transaction. under the dvpiii mode of settlement that has been adopted, both the securities leg and the fund leg are settled on a net basis. the settlement through ccil has thus reduced the gross dollar requirement by more than 90 per cent. a screen - based negotiated quotedriven system for dealings in the call / notice and the term money market ( nds - call ) has been launched by the ccil in september 18, 2006. the introduction of nds - call helps in enhancing transparency, improving price discovery and strengthening market microstructure. impact of financial sector reforms in india banks have been accorded greater discretion in sourcing and utilisation of resources, albeit in an increasingly competitive environment. the outreach of the indian banking system has increased in terms of expansion of branches / atms. in the post - reform period, assets / liabilities of banks have grown consistently at a high rate. the financial performance of banks also improved as reflected in their increased profitability. net profit to assets ratio improved from 0. 49 per cent in 2000 - 01 to 1. 13 per cent in 2003 - 04. although it subsequently declined to 0. 88 per cent in 2005 - 06, it was still significantly higher than that in the early 1990s. banks have been successful in weathering the impact of upturn in interest rate cycle through increasing diversification of their income. though banks had to incur huge expenditures on upgradation of information technology, the restructuring of the