leverage ratio that is now being implemented globally as a backstop to the risk measure as part of the overall basel iii package, is more or less a given for the indian banks. we have also been calibrating risk weights on sensitive sector exposures like commercial real estate as a macro prudential tool to help arrest building of asset price bubbles, much ahead of the prescriptions on countercyclical and capital conservation buffers which have since appeared as part of the basel iii reform pack. 7. in regulation - making we have followed a gradualist approach and have generally been wary of complex and opaque instruments / products. for the same reason, we insisted on the lenders having a ‘ skin in the game ’ in securitisation transactions, which curtailed reckless origination of loans without proper appraisal with the sole purpose of distributing the same to investors at a later date. we all know now that inadequacy of the market infrastructure to deal with the opacity and complexity of derivative products was the single - most important reason for the financial crisis. we, in india, have exercised extreme caution on the financial derivatives, baulked at opaque structures with complex pay - offs and have insisted on banks ’ ascertaining the suitability and appropriateness of the customers before selling any complex derivative instruments. rbi ’ s approach to development of the forex and interest rate derivative market has been one of cautious gradualism. regulators have also been conscious about the risks emanating from the activities of asset managers, something which is viewed as a significant vulnerability in the global context today. in this regard, there are restrictions around extent of lending and leverage the asset managers in india can undertake and also limits on their use of derivative products. 8. while we have been cautious on introduction of complex products / instruments, we have not been found wanting on efforts towards deepening and widening of financial markets. india is amongst the first few countries in the world to have a screen based electronic anonymous order matching system for secondary market trading in government securities. similarly, indian equity markets are amongst the best in the world in terms of use of technology, institutional mechanism, and products. in order to promote transparency, price discovery, cost effectiveness, better risk management and a market for hedging of risks, exchange traded currency futures and interest rate futures have been allowed to trade in india. few other developmental measures initiated by rbi are : • permitting banks to provide partial credit enhancements to bonds issued by

to the global financial crisis are not in the interest of anyone. the field of finance and banking often attracts the best from among the youth. any misuse of the financial system – caused by the actions of a few smart educated individuals – could impact the life of a billion plus population. i need not emphasize the importance of ethics and value systems to this audience. india avoided a financial crisis at home in the midst of a severe global contagion. it is our collective responsibility to raise this ethical awareness. trusted newspapers such as the hindu can take the lead here. one cannot look to the government to solve every problem. similarly banks cannot provide solutions to all your needs. it is the responsibility of everybody to build the future of tomorrow. that includes civil society such as the save nilgiris campaign which is doing good work in the nilgiris. government and banks can at best facilitate the process of economic development. let me take the example of quality education and housing mentioned earlier. recent estimates suggest that for every one percent increase in gdp, demand for education loan increases by 3 per cent, and demand for housing loans increases by 5 per cent. given the demography, as income increases, more and more students would aspire to get quality education, as a means to a better future. on the other hand, the costs of private quality education seem to be increasing significantly in recent years. after education, once they get gainful employment, decent housing will be the next aspiration. while banks will have to meet the aspirations of the youth by ensuring access to credit at competitive price, to get quality education and shelter, the private sector would have to recognize that artificially created inflation driven by unreasonable profit motives in these two critical segments would be a constraint to our growth and development ambitions. this leads to me to another critical challenge to our future growth – i. e. inclusive growth. high growth that coexists with rising inequality will become unsustainable at some point. as inclusive growth is not possible without financial inclusion, the rbi ’ s vision is that everyone in the country should first have access to financial products and services, which is being achieved in phased manner. the rationale behind this is that access to finance, along with fair and transparent products / services, is a source of empowerment and allows people to participate more effectively in the economic and social process. our dream of inclusive growth cannot be realized unless we properly educate and make employable the future generation of youth and create millions