resulted in a number of beneficial impacts. first, with larger amount of outstanding stock in each security, the liquidity in these securities has improved. second, it has led to a more efficient price discovery process in primary auctions as reflected by the considerable narrowing in the range of bids in yield terms. third, the opportunity of reopening existing issues has been used to undertake passive consolidation of debt, which has resulted in evolution of benchmark securities and also improved the liquidity in the market. for the record, let me narrate the specific reform measures relating to the market that have been implemented during the current year. these are : apart from price based auctions, reintroduction of auction of 182 - day treasury bills, issuing a calendar of t - bills issuance, a system of minimum bidding commitment of pds to cover 100 % of notified amounts in t - bills auction, underwriting by pds of 100 % of notified amounts in respect of dated government securities, permission to non - banking entities to borrow and lend money in the repo market and availment of special ways and means advances by state governments against collateral of t - bills in addition to dated securities. progress in reforms a number of other reform measures are in different stages of implementation and the primary dealers association is actively involved in most of them. it is useful to recall the status and flag issues for further consideration. widening the repo market a sub - group of the technical advisory committee on government securities market had prepared a technical paper on repos, which had been circulated among major players in the market for comments. three of the recommendations of the sub - group were announced for implementation in the monetary and credit policy of april 1999. these related to permitting non - bank entities who were hitherto permitted to undertake only reverse repos to borrow money through repos ; issuing clarifications regarding maximum period for repos and allowing repos to be undertaken in all psu bonds and bonds issued by corporate and financial institutions held in dematerialised form in recognised stock exchanges. in order to operationalise the recommendation relating to widening the repo market, another sub - group was constituted to go into the legal and regulatory aspects of setting up a clearing corporation. the sub - group is in the final stages of submitting its report. once the clearing corporation is established, it will pave the way for introduction of over - the - counter and tripartite repos. i would appreciate your views on the scope and

have more flexible laws. however, as recently as last week, switzerland has agreed in principle to dismantle the veil of secrecy governing its banking activity in order to comply with anti - money laundering requirements. this is a landmark development. corporate governance i would also like to touch upon an area, which is going to be the focus of the next generation financial sector reforms. one of the latest initiatives of rbi aims at enhancing the level of corporate governance in banks. in view of the special status enjoyed by banks whereby they freely accept deposits from the public and leverage on such funds through credit creation, legal prescription for ownership and governance of banks have been laid down in the banking regulation act, 1949. these have been supplemented by regulatory prescriptions issued by the reserve bank from time to time. these cover the following aspects : • composition of the board of directors • approval of the reserve bank for the appointment of ceo • powers for the removal of managerial personnel, ceo and directors • guidelines on criteria for appointment, role and responsibilities of directors • guidelines for acknowledgement of transfer / allotment of shares in private sector banks • foreign investment in the banking sector we have recently placed in public domain a draft paper on ‘ a comprehensive policy framework for ownership and governance in private sector banks ’. the objective of the draft guidelines issued by the reserve bank in july 2004 is to have a regulatory road map for ownership and governance in private sector banks in the interests of the depositors and financial stability. the underlying thread of the draft guidelines is to ensure that the ultimate ownership and control of banks is well diversified, banks are owned and managed by ‘ fit and proper ’ persons / entities and well capitalised and that the processes are transparent and fair. several countries, both developed and developing, have regulatory stipulations and clearance for significant shareholding and control. the threshold level may vary from country to country and can also involve more stringent conditions for higher thresholds. the draft guidelines allow for a level of shareholding of a single entity or a group of related entities beyond 10 per cent with the prior approval of the reserve bank. such approval will be governed by the principles enunciated in the february 2004 guidelines. apart from more intensive due diligence at higher levels of shareholding, the february 2004 guidelines require public interest objectives to be served for shareholding beyond 30 percent. in case where the ownership of a bank is that by a corporate entity, diversified ownership of that corporate entity will be considered among other factors.