driven largely by manufacturing and agriculture sectors. on the expenditure side, growth was led by both private and government consumption expenditure as investment growth moderated. productivity growth has slackened as reflected in increase in icor to 4. 8 from 3. 9 in the pre - crisis period. domestic saving has moderated driven by significant fall in public sector saving as government revenue deficit increased. more worrying has been a sharp deterioration in household saving in financial assets. while full saving estimates for 2011 – 12 are not available, preliminary estimates suggest that household financial saving has plummeted to 7. 8 per cent of gdp in 2011 – 12 from an already low of 9. 3 per cent in 2010 – 11 as compared with an average of 11. 6 per cent in the high growth phase. in an inflationary environment, households have tried to protect their real value of consumption by dipping into their saving. moreover, increasing household preference for gold has also dented financial saving. the saving - investment gap has widened which was filled through greater recourse to foreign saving. this was reflected in the widening of the current account deficit ( cad ) to 3. 0 per cent of gdp during 2008 – 12 from 0. 3 per cent during the high growth phase. in fact, the cad was record high at 4. 2 per cent of gdp in 2011 – 12. the sharp increase in imports of gold and crude oil – the latter reflecting in parts increase in global prices and incomplete domestic price pass - through – largely contributed to the deterioration in cad. as much of the gold demand is met through imports, this not only created leakages from the banking system but also contributed to the widening of the cad subbarao, d. ( 2009 ), “ impact of the global financial crisis on india : collateral damage and response ”, speech delivered at the symposium on “ the global economic crisis and challenges for the asian economy in a changing world ” organised by the institute for international monetary affairs, tokyo, february 18. mohanty, deepak ( 2009 ), “ global financial crisis and monetary policy response in india ”, rbi bulletin, december. bis central bankers ’ speeches beyond the sustainable level of around 2. 5 per cent of gdp. 5 with net capital flows turning insufficient to finance cad, there was a drawdown of reserves during crisis years – 2008 – 09 and 2011 – 12. reflecting these developments, there was deterioration in external vulnerability indicators : ratio of short term debt to total debt increased and import cover of reserves fell.

financial service providers is that they display high levels of transparency in product design, pricing and financial disclosures. in addition, a credible, cost effective and expedient grievance redressal mechanism has to be made available to all customers. banks must make use of technology to deliver banking products and services in a cost - effective manner. customer education is also critical so that the user can have the ability to choose appropriate and need based products and services. unless the banking system becomes customer centric in all its dimensions, it would fail to attain sufficient momentum to gain access to the next orbit. know your customer, his business and business risks 20. across the world, greater emphasis is being laid by the financial service providers on knowing their customers. it has important regulatory and business dimensions. from a regulatory perspective, banks and other financial service providers are expected to understand the business activities of their customers so that they do not, inadvertently, end up being conduits for illegal activities such as terrorism, mlm, frauds, hawala transactions, etc. from a business perspective, know your customer ( kyc ), know your customers ’ business ( kycb ) and know your customers ’ business risks ( kycbr ) are important for understanding the nature of the customer ’ s business, which would help in offering suitable products, managing credit exposure and generating early warning signals for potential delinquency risks. 21. it is important that the emphasis on kyc compliance is effectively conveyed across the organization by the top management, not just for meeting regulatory requirements, but as an opportunity to understand the customer better and maximize the gains from the customer relationship. human resource management 22. we must realize that the traditional factors of production named in economics textbooks are no longer relevant in the banking industry. land, labour, physical capital and enterprise have given way to skills, technology and human capital as the prime factors of production in the banking sector. employees are no longer “ labour ”, they are “ people ” who ought to be nurtured and cared for. when i say “ people ”, i mean the bank management and all employees – officers, clerical staff and the sub staff. an organization ’ s “ people ” are the force that can, potentially, make the difference between success and failure. when the marketplace has number of players with broadly similar product offerings, the ability and motivation levels of employees could be the clinching factor when it comes to gaining an edge over rivals. the challenge before management is to