bankers ’ association, the foreign exchange dealers association of india, the primary dealers association of india and the fixed income and money market dealers association of india. incidentally, the last two were promoted by the reserve bank of india. we have three - stage participation in the process issue of important regulations. this normally involves preliminary discussions with the representative bodies and select market participants ; preparation of a technical report by working groups that often include the regulators and the market participants and academia ; and placing the report in public domain for a feedback. on the basis of the report and the initial feedback, draft guidelines are usually formulated and again placed in public domain for a feedback. these guidelines are finalized on the basis of the further feedback. sixth, our regulations and our policies are focused on the common person. this is, for example, reflected in our approach to transparency by the industry, the ombudsman mechanism, the setting up of a banking codes and standards board of india, guidelines on recovery agents etc. this focus on the common person enhances the legitimacy of the rbi in the public eye vis - a - vis market intermediaries. though rbi issues micro regulations at times, this is necessary to strike a better balance between financial institutions and public interest at a micro level with reference to the common person. seventh, moral suasion and public articulation of concerns has helped in achieving a desired re - balancing of suspected excesses in risk - taking among banks. some of the areas where moral suasion has been used are the need for banks to monitor unhedged foreign currency exposures of their corporate clients, adoption of appropriate incentive mechanisms by banks for encouraging disclosures of derivative exposures by their corporate clients, banks ’ reliance on non - deposit resources to finance assets, their excessive reliance on wholesale deposits and uncomfortable loan - to - value ( ltv ) ratios in respect of housing loans etc. eighth, the rbi has also focused on liquidity mechanisms and systems. asset liability management is left to the banks, but regulatory limits on short term buckets are prescribed. further, in order to reduce the extent of concentration of bank ’ s liabilities the reserve bank had issued guidelines to banks in march 2007 placing prudential limits on the extent of their inter - bank liability ( ibl ) as a proportion of their networth ( 200 % ). those banks which had a higher capital adequacy ratio of 125 % of the regulatory minimum were allowed a higher limit of 300 % of networth

. in addition, prudential limits have also been placed on the extent to which banks may access the inter - bank call money market both as a lender and as a borrower. ninth, whenever out - of - the - ordinary situations arise, exceptional or flexible arrangements are needed. timely flexibility, while reacting to the underlying balance is essential. this helps in avoiding more serious problems relating to the balance over the medium - to - longer term. for example, recently oil imports had to be financed through off - market processes. delayed adjustments to such sudden and unexpected cross - border exogenous developments at such times may impose a stress on liquidity. hence, addressing frictional issues of liquidity as distinct from underlying issues of levels of liquidity is required to look at the balance dynamics. thank you.