during the 2008 crisis. v. cross - border bank resolution 28. another challenging area not only for us but also at the global level is cross - border bank resolution. the main problem is differences in laws and regulatory frameworks across countries which makes resolution difficult, inefficient and costly. there is clearly a strong case for moving towards a more harmonized legal and regulatory framework. 29. in india, the presence of cross border banks is relatively small. but as the world economy recovers and global trade and financial transactions grow, india will increasingly be exposed to cross border risks. now is the time to identify steps to make failure resolution both fast and effective regardless of its provenance. we will need to strengthen relations with foreign supervisory authorities, intensify information sharing, and consider ways to develop a consensus on options for resolving a failing global institution. 30. a connected issue in this context, one that has been engaging our attention for the past few years, is the appropriate framework for operations of foreign banks in india. in particular, we are debating whether we should require compulsory local incorporation of foreign banks. the organizational structure for cross - border banking groups differs across the world and reflects the diversity of their business models and the varying stages of financial development of different countries. both the branch and subsidiary models have merits as well as limitations. the predominant view globally is that under a branch mode, it may be difficult to determine the assets that would be available in the event of the failure of the foreign bank to satisfy local creditors ’ claims and the local liabilities that can be attributed to the branch. the subsidiary framework provides greater regulatory control and comfort to the host jurisdictions, apart from easing the resolution process. in crisis situations, the distinction between the branch and the rest of the bank, and the legal location of assets and liabilities can be really important. the reserve bank will be bringing out guidelines for the presence of foreign banks in india based on the discussion paper that was released in january this year. vi. resolution framework for sifis 31. the last challenge i want to raise is regarding regulation of systemically important financial institutions ( sifis ). oversight and regulation of sifis is currently high on the international agenda, especially as they have a large presence in many countries and also encompass a huge non - banking sector. the treatment of sifis requires a host of skills and knowledge that all countries are struggling to understand. there is a debate on the appropriateness of “ systemic sur

/ facilitators for retail investors ; introduction of products for retail 2 / 5 bis central bankers'speeches investors, etc. interoperability is sought to be enhanced by linking market infrastructure – linking exchange trading systems and nds - om ; and linking rbi ’ s subsidiary general ledger system and the depositories. 13. foreign investors have been permitted to invest in g - secs, subject to prudential limits. recent initiatives like the introduction of the voluntary retention route ( vrr ) and fully accessible route ( far ) have contributed to demand side resilience. non - resident participation in interest rate derivatives markets for hedging as well trading has been permitted. the regulatory framework for hedging of foreign exchange risk has been liberalized to incentivize investors to hedge their currency risk onshore. several other measures to promote ‘ ease of doing business ’ by foreign investors viz., t + 2 settlement of trades, extended timing for reporting of transactions and allowing banks to fund margins for g - sec trades, have also been taken. market infrastructure – state - of - the - art trade and post - trade services 14. a sound, robust and safe market infrastructure increases the resilience of the g - sec market against external shocks and contributes to price discovery. the reserve bank has continuously engaged in developing state - of - the - art infrastructure relating to trading and post - trade services, including settlement, reporting and timely dissemination of traded information, both in outright and repo markets. i can say with all humility that the infrastructure of the g - sec market in india can be regarded as cutting edge in terms of sophistication. the nds - om system of the reserve bank – an anonymous order matching platform – provides multiple functionalities, which include trading in standard and odd lot sizes and trading in the “ when - issued ” market. this is in sharp contrast to most jurisdictions – including advanced economies, where trading in government bonds is predominantly voice - negotiated or fragmented over multiple electronic trading platforms ( etps ). the nds - om is perhaps unique as it ( i ) provides unparalleled pre - and post - trade transparency ; ( ii ) pools all market liquidity, providing a single order book ; and ( iii ) facilitates anonymity in trading, thus ensuring fair and non - discriminatory price discovery even for small investors. 15. complementing the trading infrastructure is a delivery - versus - payment - based guaranteed settlement mechanism which eliminates