sheets by making equity capital available to the institutions. that is where others come in. bis central bankers ’ speeches first of all, the onus is on the banks themselves to attract the required capital on the market. if that fails, recapitalisation by the state may become necessary. a recapitalisation of this kind should not be stigmatised, however. we need adequately capitalised banks which are strong and have a viable future so that they can fulfil their role as service providers for the real sector. 3. market discipline in the financial system strengthens the real economy adequate capitalisation of banks is thus an essential precondition for conducting the deleveraging process in a way that is friendly to growth. but for europe and, above all, the euro area to return to sustained growth, a great deal more still has to happen. the economic value added of a financial system is measured chiefly by how successful it is in directing capital into those areas of the real sector where it brings the greatest return. in this connection, the single resolution mechanism for the restructuring and resolution of banks, which is currently under discussion as the second pillar of the banking union, also plays an important role. this is because, in a weakened banking system with excess capacities, the solution cannot lie solely in recapitalisation. it also has to be possible for individual weak banks to exit the market. experience in japan reveals very clearly what negative effects “ zombie banks ” can have on the real economy with regard to the single resolution mechanism, it is mainly its potential advantages for financial stability that are being discussed at present. in order to strengthen market discipline and minimise the risk of bank bailouts at the taxpayers ’ expense, shareholders and investors are to bear the losses in future. abolishing implicit guarantees is indeed all - important. it is the only way to ensure that the banks ’ wholesale funding costs are an appropriate reflection of the risks they have incurred, which counteracts an excessive appetite for risk. that benefits not just financial stability, however, but also the real sector and growth. this is confirmed by a recently published bundesbank study. 1 a functioning resolution mechanism has a positive influence on the banks ’ decision - making process in lending. banks having grounds to fear that, under the terms of an existing resolution mechanism, they will exit the market in a worst - case scenario lowers risk appetite to an appropriate level and increases the incentive to monitor loans carefully. this means that capital will tend

segments stood at 42. 8 percent 32. 7 per cent respectively during the period between march 2005 and march 2013. bis central bankers ’ speeches growth in bank deposits • ner accounted for less than 2 per cent share in all india bank deposits and like the trend observed in respect of bank credit, the share hovered at around 2 per cent during the period between march 2005 and march 2013 ( table 2 ). • across segments, the deposit collection is relatively more in urban and semi - urban segments. accordingly, the average share of urban and semi - urban deposits in total deposits of ner remained at 46. 0 per cent and 34. 9 per cent respectively, while the same for rural segment stood at 19. 1 per cent during the period between march 2005 and march 2013. trends in c - d ratio • the cd ratio of ner as whole as well as individual states is far below the national average. the performance of ner in respect of this indicator worsened from around 40 per cent in march 2007 to 32. 9 per cent in march 2013, which is a point to be noted. bis central bankers ’ speeches • cd ratio of rural segment decreased from around 54 per cent during the period between march 2007 and march 2008 to around 43 per cent in march 2013. villages covered by banks • the total number of villages in ner remained at 42, 250 ( source : census, 2011, govt. of india ). of these, only 1866 villages ( 4. 4 per cent ) were covered under financial inclusion plans as on march 2012 ( table 3 ). on the other hand, the number of bcs appointed increased from 939 in march 2011 to 1592 in march 2012. • across eight ne states, the progress in number of villages covered is significantly on higher side in the case of assam and tripura than other states. bis central bankers ’ speeches urban co - operative banks • there are only 17 urban co - operative banks in ner out of 1586 urban co - operative banks in all india ( source : urban banks department, rbi ). rural co - operative banks • there exists a two tier system of rural co - operatives in ner. all the states of ner are having two - tier short term cooperative credit structure i. e., a state cooperative bank at apex level and primary agriculture cooperative society ( pacs ) at ground level. there are no district central cooperative banks functioning in these states. the pacs are direct members of the state cooperative banks. •