punished promptly even more remote? have centrally - directed one - time settlements and somewhat unclear basis of dispensations of bifr helped in improving credit - recovery process? fifth, because of unwillingness to change structural rigidities, distortions in governance structures may be possible. for example, the organization of idfc as a private company while the financial participation by government and rbi is relatively large, represents a compromise to enable flexibility in view of rigidities of majority public sector ownership. is it better to have in - built flexibility in the structures? finally, and this indeed is a troubling thought. in a regime where the governance structures are yet to be fully strengthened and contract - enforcement through legal means difficult as well as delayed, the preference for dominant private - ownership should be accompanied by intensive efforts to strengthen efficiency and autonomy of public ownership. in other words, should privatisation be a credible threat to ensure reform of public sector and movement between the public and private be a more dynamic process than unidirectional or rigid? in other words, are the choices only in terms of centrally decided nationalisation or privatisation? is it possible for each bank to evolve into different ownership patterns to meet the challenges of paradigm shift? technical vision a technical vision is, and for that matter any vision is generally clear in terms of broad contours and certainly vague in respect of detail. a vision is not necessarily feasible but hopefully possible. a technical vision is, above all, one that transcends existing policy framework and is exploratory. having identified the crux of the paradigm shift as one relating to structural aspects, a brief outline of such a technical vision is presented below in respect of each segment of banking, mainly to provoke a discussion and definitely, it is not rbi view, but a technical vision. ( a ) all public sector banks could be converted into companies, to accord flexibility for changes in ownership, mergers, acquisitions, sound corporate governance and motivation for workforce to compete effectively. ( b ) to professionalise the ownership functions and ensure that portfolio is shuttled around to optimise public interest, a holding company of public sector banks can be formed to which all shares held by government and rbi are transferred. the mandate for holding company can be three - fold, viz., fiscal neutrality, protecting the interests of those banks that are serving special public purpose by infusing resources and enhancing bank - wise, genuine board management and worker motivation to cope with paradigm shifts occurring

y v reddy : forex reserves, stabilization funds and sovereign wealth funds – indian perspective address by dr y v reddy, governor of the reserve bank of india, at the golden jubilee celebrations of the foreign exchange dealers ’ association of india, mumbai, 8 october 2007. * * * shri sridharan, chairman, fedai, ladies and gentlemen i am happy to be here today with the members of the foreign exchange dealers association of india, popularly known as fedai in the industry. fedai completes 50 years in 2008 and the reserve bank and fedai have shared a unique and symbiotic relationship all these years. since the beginning of the reforms, fedai has partnered with the reserve bank to ensure adoption of best practices in the profession of foreign exchange dealing. fedai also plays a very important role as a communication channel between the reserve bank and the banks authorised to deal in foreign exchange. fedai continues to provide valuable insights in this vital segment of our financial markets. i am happy that on the occasion of its golden jubilee celebrations, fedai is releasing a monograph on its 50 years ’ history and a brochure on foreign exchange facilities, which will assist resident individuals who access these facilities. this is also expected to provide greater understanding and awareness among the authorised dealers ’ branch level staff dealing with customers and enhance the quality of customer service. the topic for the panel discussion today is pertinent in the current context and we in the reserve bank look forward to obtaining a feedback of these discussions. there has been, in the recent past, a growing interest in the magnitudes and working of what may be broadly characterized as national foreign asset funds. despite several overlapping features, they broadly consist of foreign exchange reserves, stabilization funds and sovereign wealth funds. while these funds have the characteristics of being in the public sector, the motives for establishment, sources of funding and institutional arrangements for managing them vary considerably though there is a great degree of consensus on these aspects as far as foreign exchange reserves are concerned. while there are difficulties in generalizations in regard to these funds, other than foreign exchange reserves, due to the sheer variety and complexities of features and arrangements in different countries, it is essential to appreciate the broad characteristics of these funds, in view of their growing importance in global financial flows. for the purpose of today ’ s talk, “ funds ” would refer to stabilisation funds and sovereign wealth funds ( swfs ) that are to be considered separately from the foreign exchange reserves. management of the