and its subsidiaries, private sector banks and foreign banks. 32. notwithstanding this wide array of legislations of varying vintage, the statutory arrangement has served the system well by helping maintain an orderly banking system. the banking regulation act has not only stood the test of time, but several of its provisions such as the requirement of minimum paid up capital and reserves, restrictions on payment of dividend, transfer of a percentage of profits to reserves, maintenance of slr, restrictions on connected lending, maintaining a percentage of domestic liabilities as assets in india have all helped the reserve bank in preventing crises and maintaining financial stability. 33. needless to say, each of the statutes was crafted in a contemporaneous setting reflecting the needs and concerns of the time ; and almost all the statutes have had to be amended from time to time to reflect changes in circumstances and context. there is a strong case for reviewing all the various legislations and recasting them for a number of reasons. first, the fact that different banks are governed by different laws has created in an uneven playing field and that needs to be levelled to provide for fair competition. second, a single, harmonized legislation applicable to all banks will provide transparency, comprehensiveness and clarity. third, there is also a need to iron out inconsistencies between the primary laws governing the banking sector and other laws applicable to the banking sector. illustratively, the procedure for combination of enterprises under the competition ( amendment ) act, 2007 is inconsistent with the provisions of the banking regulation act dealing with amalgamation of banking companies. such inconsistencies need to be removed while reviewing banking laws. 34. the need for revisiting the statutes has been buttressed by the experience of the global financial crisis. the crisis has thrown up a number of areas requiring significant legislative action either because there is no legislation or because the prevailing legislation is inadequate. illustratively, issues requiring legislative attention include the orderly resolution of failing banks and financial institutions, domestically as well as cross - border, home - host regulatory cooperation in information sharing, convergence of indian accounting standards with ifrs, empowering rbi for consolidated supervision, supervision of financial conglomerates, etc. 35. the task of rewriting the laws governing the banking sector should be driven by several somewhat inter - related motivations. first, there is a compelling need to integrate the various statutes governing different segments of the banking industry and different dimensions of the banking business into a harmonized law to provide clarity

loan restructuring of viable assets and reducing nonperforming loans through recovery or upgradation. the efficiency of some of the larger banks in particular has to improve in line with their domestic peers and relative to global standards. 44. while on the issue of efficiency, i am both troubled and intrigued by the fact that our banks see financial inclusion as an obligation rather than as an opportunity. if pursued effectively, financial inclusion will provide banks access to sizeable low cost funds as also opportunities for lending in the small volume segment. the latter should be possible since the reserve bank has since deregulated the interest rate that can be charged on small value loans. to gainfully pursue financial inclusion, banks will need to constantly reinvent their business models and design products and services demanded by a growing economy and one that is growing through a rapid structural transformation. conclusion 45. let me now summarize. i have raised the following five issues for further deliberation at this conference : ( i ) are indian banks prepared for basel iii? ( ii ) should indian banks aim to become global? ( iii ) should we mandate foreign banks to come in only as subsidiaries? ( iv ) why do we need to rewrite laws governing the banking sector? ( v ) where do indian banks stand on efficiency parameters? 46. i must admit that this is by no means a comprehensive listing of frontier issues in indian banking. indeed, in preparation for this talk, i asked my office for a list of issues that i can raise. they gave me a first list of 50 issues and added for good measure that they can expand it should i so desire. just shows how much banking reform is on the mind of the reserve bank. needless to say, i had to be quite ruthless in winnowing down to just five issues so that i do not overstay my welcome in this inaugural session. i will be happy to share with you other issues and our thoughts on them when we meet formally and informally in due course. 47. after this inaugural session, you will go into specific topic sessions to “ ideate, innovate and inspire ”. this theme is broad and deep, and encourages you to reflect on the big picture. the financial crisis has taken a devastating toll on global well - being and put the world economy back by several years. as we all know, in india we have been relatively unscathed by the crisis. but note that this is true only in relative terms. we should not forget