as a proportion of banks ’ net worth, restricting access to uncollateralized funding market to banks and primary dealers with caps on both borrowing and lending, increasingly subjecting nbfcs to more stringent prudential regulations as also restricting banks ’ exposure to nbfcs to contain regulatory arbitrage. the other noticeable aspect regarding policy measures has been the innovative use of countercyclical policies to address the procyclicality issues. the countercyclical policies were introduced as early as 2004 by using time varying sectoral risk weights and provisioning, though rbi had used them sporadically even earlier. these unconventional measures taken in response to emerging risks are now widely acknowledged to have played a significant role in protecting the indian financial system from key vulnerabilities. 7. we have, thus, much to be satisfied about, as we have come a long way since the 1991 reforms. even as we rejoice in our achievements and success, we must have the humility to acknowledge that much more needs to be achieved in our pursuit of excellence. so let us look at the road ahead. iii. indian banking – the road ahead 8. future is always uncertain but coming times look more uncertain than ever. i am reminded of a quip “ the trouble with our times is that the future is not what it used to be ”. there are plenty of “ known unknowns and unknown unknowns ”. the future holds a lot of opportunities as well as challenges for all of us. the conference would have already focused on the opportunities and how to make most of them. let me list out a few challenges that await us in the future. 9. for elaborating on the challenges that lie ahead of us. i would categorise them into three broad categories viz. a. challenges in coping up with the emerging regulatory and supervisory framework b. challenges in meeting the specific needs of the economy and c. challenges in fixing the fault lines in the system. bis central bankers ’ speeches a. challenges in coping up with the emerging regulatory and supervisory framework ( i ) implementation of advanced approaches under basel ii 10. the implementation of the advanced approaches under basel ii poses several challenges for banks and the reserve bank of india alike. the standardized approaches have already been implemented in india and all the commercial banks have migrated to the standardized approach under basel ii framework as of march 2009. migration to the advanced approaches is important for larger banks because it involves adoption of more sophisticated risk management systems

be made to bring a certain minimum percentage of existing customers to the fold of mobile payments. banks may run customer education and awareness campaigns focused on mobile banking including its security aspects. the rural branches in a sense have to become learning centers for ict based banking. here the role of staff, particularly the frontline staff, of the banks and the field staff of the business correspondents / agents is very critical in handholding the new generation customers as they transit from assisted mode to self service mode of digital banking. this would also require partnering with merchants for acceptance of mobile payments. the key to cheap and universal payments and remittances will be if we can find a safe way to allow funds to be freely transferred between bank accounts and mobile wallets as well as cashed out of mobile wallets through a wide spread network of business correspondents. leveraging technology for remittance assumes criticality when a new set of players in the form of payment banks will emerge sooner than later. it infrastructure and governance : supervisory perspectives 11. as the regulator and supervisor of banks, let me focus a bit on our perspectives on the it infrastructure and governance. as key areas of focus, i would like to list a few of the unfinished agenda items which banks need to pursue more vigorously : bis central bankers ’ speeches a. quality of returns generated by the core banking solution ( cbs ) of the banks is not up to the mark in many cases and it is not able to provide the data in customised formats as required by the regulator / supervisor. banks have to examine the need for making their cbs systems capable of meeting, inter alia, not only all their internal mis requirements but also of generating regulatory / supervisory returns on a real time basis. b. system driven identification of npas has not been found robust enough in certain banks. though banks are taking remedial actions in such cases, it does not alleviate the supervisory discomfort with this kind of situation. c. automated data flow ( adf ) application is yet to get fully implemented in all the banks. in absence of full adf implementation, mis reports are open for manual intervention and operational errors apart from delay in submission. the system also needs to address the integration issues of the legacy data in the centralised data server for a robust mis. to test the accuracy of returns generated through adf system around 3000 unique data elements covered in the returns already under xbrl process, reserve bank will forward to banks for generation of values for these elements from