can hide related party lending behind complex company structures or through lending to suppliers of the promoters and their group companies. as we contemplate allowing corporates to promote banks, there is need for changes in statutes and regulations to address these concerns. accountability, transparency and ethics the separation of ownership and management can create conflict of interest if there is a breach of trust by managers on account of intention, omission, negligence or incompetence. this can be taken care of by making boards more accountable to all stakeholders and making their functioning transparent. over the years, we have tried to align our transparency and disclosure standards to global best practices. but we need to ask questions. is the voice of independent directors always independent? do bank ceos countenance criticism from the board? are boards succumbing to “ group think ” and abandoning their responsibility for independent judgement? it is only through such soul searching that corporate governance of banks can improve its effectiveness. bis central bankers ’ speeches the failure on the scale we saw during the recent global financial crisis is also reflective of poor ethical standards in banks. almost all the complex gamut of causes of the crisis relate to how the financial system operated. the behaviour of actors across the chain of the financial sector was swayed by the opportunity for making quick profit rather than by fair, ethical and moral standards. neither were the sub - prime borrowers adequately warned that there was a good chance of fall in asset prices nor did investment advisers tell their clients of the risk they were taking in buying mbas and cdos. such behaviour was not only not checked, but was even encouraged. here at home, though our banking sector largely escaped the crisis, we should introspect on our own shortcomings and loose practices. to what extent have banks deviated from proper conduct in the sale of forex derivatives? is there too much focus on the quarterly earnings cycle to the detriment of longer term performance? are aggressive strategies leading to excessive risk taking? issues such as these, i believe, underscore the special ethical dimension of the financial sector over and above that of other businesses. boards of banks and financial institutions have to be conscious of their obligation not to hold the larger public interest hostage to their private profit motive. compensation compensation in the banking sector has been another high profile issue post - crisis. it is now widely acknowledged that the flawed incentives framework underlying banks ’ compensation structures in the advanced countries fuelled the crisis. the performance - based compensation of bank

from british rule to independence and the division of the assets and liabilities of the reserve bank between india and pakistan consequent upon partition. he also helped smoothen the transition of the bank from a shareholder ’ s institution to a state owned organization, when the reserve bank was nationalized in january 1949. shri h. v. r. iengar, who succeeded sir chintaman, introduced deposit insurance for bank deposits in 1962, making india one of the earliest countries to experiment with deposit insurance. that other countries emulated this initiative is a testimony to shri iengar ’ s innovativeness and foresight. dr. l. k. jha, by far the most distinguished and accomplished civil servant to occupy the office of the governor, was responsible for giving a distinct development orientation to rbi policies. the reserve bank under dr jha ’ s leadership was an influential force in shaping landmark policies for the devaluation of rupee, the green revolution, social control followed by nationalization of 14 major commercial banks. dr. ig patel ’ s tenure as governor of rbi witnessed the demonetization of high denomination notes as well as the “ gold auctions ” conducted by the bank on behalf of government of india. dr. patel played a key role in negotiating imf assistance in 1981 to tide over the balance of payments constraints. all of us of course know the contributions of our hon ’ ble prime minister dr. manmohan singh who, after deftly steering the reserve bank as its governor, went on to become india ’ s finance minister and put india on a path of historic and path breaking economic reforms. dr. r. n. malhotra, who served as the governor during the rajeev gandhi years, gave a reform orientation to rbi. his tenure saw widening of the money market in india and introduction of new instruments recommended by the sukhomoy chakravarty committee on the monetary system and the vaghul working group on the money market. as the rbi governor, shri s. venkitaramanan played a leading role in managing india ’ s deepest balance of payments crisis in 1991. dr. c rangarajan will be remembered for beginning the historic process of financial sector reforms. through his leadership, dr. rangarajan showed how monetary policy has a key role in economic development. he will be most remembered for bringing an end to automatic deficit financing and thereby for setting the course for independent monetary policy. dr. bimal jalan ab