. consider, for example, dennis levine, the drexel burnham lambert investment banker who was convicted of insider trading in one of wall street ’ s biggest scandals. according to him, it was just so easy. in seven years he multiplied a paltry $ 40, 000 into $ 12 million, and all it took was a 20 - second phone call to an offshore bank a couple of times a month – may be 200 calls in total. he was confident that the elaborate veils of secrecy plus overseas bank privacy laws would protect him. closer home there is the recent case of satyam which allegedly window dressed the company accounts for over ten years, betraying the trust of all its stakeholders. john stuart mill said that if we make men honest, good and decent, then they will make themselves honest, good and decent engineers, doctors and teachers, and may i add, financial sector professionals. the financial sector is, after all, a reflection of the society in which it operates. so, the approach to bringing ethical values into finance has to begin not by special efforts to enforce or regulate ethical standards in finance, but by fostering a value system in society at large. ethical issues thrown up by the financial crisis this global financial crisis has been the deepest, broadest and most hurting financial crisis since 1929. all of a sudden, it seems like an entire super structure was built on sand instead of rock as it was believed. we are too close to the crisis to really grasp how this crisis might, as they say, turn out to be game changing. what the crisis has done is to cause a massive break down of trust : trust in the financial system, trust in bankers, trust in business, trust in business leaders, trust in investment advisers, trust in credit rating agencies, in politicians, in the media and in the process of globalization. when you break down the complex gamut of the causes of the crisis, several skeletons tumble out of the cupboard. almost all of these relate to how the financial system operated. in a phrase that has now become daily staple, sub - prime borrowers were given loans at teaser rates. and these borrowers were led to believe that they would never lose as the price of the house they were buying will only keep going up. the loans were sliced and diced, built into complex products and rated by rating agencies. dazzled by these ratings, gullible investors lapped up the mortgage based assets ( mba ) not realizing the risk they were taking

5 percent now. secondly, interest rates have been deregulated. the number of administered interest rates on bank advances has been reduced from 20 in 1989 - 90 to just 2 by 1994 - 95. interest rates on loans above rs. 2 lakh are fully deregulated. prime lending rates have declined from 19 percent in 1991 - 92 and the benchmark plr now, in respect of five major banks, is in the range of 10. 5 to 11. 5 percent currently. interest rates on domestic term deposits have also been deregulated. thirdly, directed credit schemes have been streamlined to avoid inefficient use of credit. fourthly, a board for financial supervision has been set up with an advisory council to strengthen the supervisory system of banks and financial institutions and an independent department of banking supervision has been set up in the rbi to assist the board. at the micro level, the less strong banks, which suffered capital erosion due to rising levels of non - performing assets were recapitalised. secondly, capital to risk - weighted assets ratio of 8 percent was introduced. this is now at 9 percent. thirdly, prudential norms for income recognition, classification of assets and provisioning for bad debts were introduced. the management of npas has been fortified by the enactment of the securitisation & reconstruction of financial assets and enforcement of securities interest ( sarfaesi ) act, 2002 which provides statutory support for the enforcement of creditors ’ rights and inter alia, paved the way for the establishment of asset reconstruction companies. fourthly, debt recovery tribunals were set up to assist the banks in the recovery of loans. fifthly, the scheme of ombudsman was introduced in 1995, to look into and resolve customer grievances. sixthly, the state bank of india act, 1955 and the bank nationalisation act of 1970 were amended to enable the banks to access the capital market for debt and equity. lastly, reforms were also introduced in respect of regional rural banks ( rrbs ) and non - bank finance companies ( nbfcs ). the above measures together with the strengthening of prudential norms and market discipline and the adoption of international benchmarks to suit india specific needs have served to make the indian financial sector competitive, viable and resilient. financial crises the world over have revealed that weak financial systems and their supervision are the most important factors contributing to macro instability. as east asia discovered so painfully, the health of the banking