though our policy stance on ecl impairment provisions including possible prudential floors remains to be finalized, it is important that our banks start work on strengthening their data capture and risk management systems to enable impairment assessment. in this context, i wish to raise an issue today for larger debate. the regulatory experience with the internal models employed by the global banks to assess the risks under the basel framework has not been very pleasant. the assessments carried out since the global financial crisis have pointed out the complex models used by the banks for risk computation under advanced approaches had significantly underestimated risks that the banks had on their books. since, the ecl framework would involve principle based assessment of credit risk ( using models ), the concern would be around underestimation of risks by the institutions. hence, i wonder that as we prepare towards ifrs, could we conceive of an independent, umbrella entity to prescribe or validate models, within the framework of the accounting standards or to at least examine the approach adopted by the banks in computing expected losses so as to ensure consistency in assessment across the sector, besides having supervisory comfort on the adequacy of accounting provisions. finally, one last question is whether we could draw some lessons from how banks globally have transitioned to ifrs from local gaap? while we could get some perspectives about the challenges involved in the transition, the fact is that the challenges would be much greater here in india as we do not have an ias 39 equivalent framework unlike other jurisdictions which migrated to ifrs from local gaap largely aligned with ias 39 or us gaap. in that sense, ifrs transition is a paradigm shift in the indian context. ( v ) consumer protection : the profile of the customer that the banks deal with is undergoing a major transformation. this also calls for a transformation in the way banks position their products and services for their customers. customers as a group are no longer satisfied with off - the - shelf products and would rather have products customised to their individual needs. towards this end, the banks have to leverage big data and proactively offer products and services that suit the needs of individual customers. the fourth global ifrs banking survey by deloitte : the survey includes the views of 54 banks from europe, the middle east & africa, asia pacific and the americas. responses were received from 14 of the 29 global systemically important financial institutions ( g - sifis ) and 25 of the top 50 global banking groups measured by total

whose funds are entrusted with the bank are not in control of their management. thus, concentrated shareholding in banks controlling huge public funds does pose issues related to the risk of concentration of ownership because of the moral hazard problem and linkages of owners with businesses. hence diversification of ownership is desirable as also ensuring fit and proper status of such owners and directors. at the same time with diversified ownership, there is, perhaps, even greater concern over corporate governance and professional management, in view of this, apart from ensuring fit and proper considerations, in order to safeguard depositors interest and ensure systemic stability, the regulatory and supervisory framework has to ensure that banks have adequate capital to cushion risks that are inevitable in their operations, follow prudent and transparent accounting practices and are managed in accordance with the best practices for risk management. seen from this standpoint, great responsibility is imposed on the regulator. the issue has been raised as to why now - what is new that these concerns are being raised now? after nationalisation of major banks in 1969 and in 1980, in a sense, being government owned the issue did not arise till recently. as part of financial sector reform and keeping in view the growth needs of the economy it is expected that the significance and share of the private sector banks will increase as also public shareholding in the public sector banks within the current policy framework. the banks are expected to grow with the economy. there is also opening up of the economy and increasing integration with the global economy. as this happens, the regulator has to ensure that the banking system is strong, healthy and resilient to withstand shocks. we also want to ensure that transparency improves and want to move to international best practices in regulation, supervision, risk management while at same time calibrating the suitability to the domestic conditions and needs at the current stage of development key features of the guidelines to begin with, let me enumerate the salient features of the guidelines. 1. all shareholding of 5 per cent and above representing important shareholding will have to meet the ‘ fit and proper ’ tests of competence, reputation, track record, integrity, satisfactory outcome of financial vetting, source of funds and so on. where the applicant is a body corporate, fit and proper would include good corporate governance, financial strength and integrity in addition to the assessment of individuals and other entities associated with the body corporate as enumerated above. 2. in the interest of diversified ownership of banks, the objective will be to ensure that