spread over 10 year g - sec yield ( currently 7. 55 % ). significantly, this can be applied equally to creating longterm fixed - rate financing solutions for long gestation infrastructure projects as well. that is as simple as it can get in terms of creating two - in - one fixed - rate long - term market - based financing solutions for both affordable housing and infrastructure. and considering that the outstanding housing loans constitute a mere 10 %, and outstanding infrastructure loans of banks, a mere 8 % of the total outstanding notional principal amount of irs of rs. 38 trillion, the above solution is perfectly doable. however, i would still leave the thought with this distinguished and discerning audience to explore and take it forward. 6. with these remarks, i close my address and wish the conference all success that it so much deserves. thank you all so very much.

of 2003, when the federal funds rate was at its lowest at 1 per cent, a new trend of floating - rate mortgages, which in the usa are known as adjustable rate mortgages ( arms ), emerged with, of course, its “ teaser - rate variant ” where, as we know, interest rates were set at rates lower than the ruling market rates during the initial period and variable rates, higher than the corresponding market rates, in the subsequent period. it is, of course, history now that when the federal reserve started raising interest rates from 2004 through 2006 – 07, there were widespread defaults precisely in the floating - rate / teaser loan / arm segment with, of course, collateral damage in the conforming, fixed - rate mortgage segment as well. 5. if, by now, i have been persuasive enough to disarm and convert lenders to the above proposition, i must still answer the legitimate question that lenders would logically have as to how then to make a long - term fixed - rate loan, whether for housing, or for infrastructure, without creating any serious asset - liability mismatch in their balance sheets. to this question, i have a very simple market - based solution which is that banks / lenders can easily have recourse to a very liquid and vibrant irs ( interest rate swaps ) market, where, as on 22 january 2010, outstanding notional principal amounts aggregated rs. 38 trillion ( almost 75 % of the total banking assets in india as also of the nation ’ s gdp ), and easily transform their short - term liability into a long - term fixed - rate one and thus create a synthetic long - term fixed - rate mortgage financing by doing the following : ( a ) receive fixed - rate for one year and pay floating overnight rate in the irs market. ( assuming banks ’ average liability is about one year ). ( b ) receive floating overnight rate and pay 10 - year in irs market. this effectively synthetically transforms a one year floating - rate liability of bank into a synthetic 10 - year fixed - rate liability. by loading margin over this rate, banks can make a 10 - year fixed - rate loan to a mortgage borrower. and, significantly, considering that irs trades about 50 to 80 basis points below sovereign yield, it is win - win for both banks and long - term fixed rate mortgage borrower who, even after bankers ’ spreads / margins, will be able to borrow at a reasonable