a good track record to provide the comfort of knowledge of the borrower. • secondly, states can leverage on the provision of guarantees. there is a recent instance where the state housing board has partnered with a bank for housing schemes for families below poverty line ( bpl ) in urban areas where the housing board provides a first loss guarantee to the extent of 10 per cent of the loan amount. the housing board identifies the beneficiaries and helps in recovery. the title is passed only on completion of loan repayment. in addition to making available the housing loan, health insurance cover is also provided with either the premium being fully or partly provided by the state government. there could be calamity or accident cover as well. like i mentioned earlier, such insurance reduces the risk of the loan asset and can lead to more flow of funds and better pricing. • thirdly, in urban areas, there is considerable scope for better pricing of services. it is common knowledge that the poor end up paying more for various public goods, such as, water, power, sanitation. efficient provision of services, with minimum leakages, and their comparative pricing is critical. formulation of schemes that have a viable pricing policy will enable the involvement of the financial system to ensure that adequate funds are available for such infrastructure projects. this initiative of the planning commission in conducting this programme in collaboration with the united nations development programme and the college of agricultural banking is indeed a very welcome one to build synergy through mutuality and convergence of the efforts of all the major stakeholders in the progress towards achievement of mdgs. i find that your time here has been structured well with presentations by a number of eminent persons on various aspects having a critical bearing on human development, such as, public health, livelihood, government and group work as well as experience sharing ending up with an interesting quiz. i wish you a fruitful week ahead.

in place preventive measures to preempt frauds. in case of banks, three potentially powerful mechanisms could induce discipline against frauds : 1. investigative / vigilance / legal deterrence : criminal investigation of frauds and attached penalties can serve as an effective deterrence if reporting and investigation are expedient and penalties are adequately severe relative to the gains from fraudulent activity. 2. market discipline : fraudulent activity can be a net loss to the bottom - line ; in this case, bank investors would impose deterrence, e. g., uninsured creditors might “ run ” on the bank inducing liquidity problems, or shareholders might “ exit ”, effectively raising the cost of capital and inducing solvency questions. in anticipation of such disruptive outcomes that might cause loss of control, management and board members may put in place governance mechanisms to prevent or reduce the incidence of fraud and / or hold larger buffers in the capital structure to bear losses when fraud materialises. 3. regulatory discipline : banks in most parts of the world, however, have a significant portion of deposit funding that is insured, and since banks serve critical payments and settlements function, they are often too big to fail or too many to fail. hence, a part of the market discipline is weakened as a tradeoff with financial stability and is substituted by delegation of supervisory and regulatory powers to a banking regulator. detection and punishment by the regulator then need to be effective to discipline fraud. how do these mechanisms work in case of private and public sector banks in india? investigative and formal enforcement process takes in our country, perhaps for the right reasons, a fair bit of time. indeed, rbi data on banking frauds suggests that only a handful of cases over the past five years have had closure, and cases of substantive economic significance remain open. as a result, the overall enforcement mechanism – at least until now – is not perceived to be a major deterrent to frauds relative to economic gains from fraud. it is fair to say that in case of private sector banks, the real deterrence arises from market and regulatory discipline, and their confluence. a private bank ceo ’ s primary concern is whether s / he will be able to raise capital when the need arises or even whether s / he will still be running the bank the next day. the point is that they could be readily cautioned through their boards and even replaced by the rbi in case of large or persistent irregularities. further, a private bank failing to meet bank