of sound macroeconomic policies and structural reforms in the context of the continuing ceasefire, and improvements in the global economic environment. the international community has extended support for the government ’ s economic progress and peace process. there were elections in early april and a new government is in place. the sri lankan authorities are committed to making further progress on the peace front, growth and poverty reduction and to sustain macroeconomic stability. the new government will continue discussions with the fund on the poverty reduction and growth facility / extended fund facility ( prgf / eff ) arrangement. bangladesh has continued steadfast implementation of reform measures under the prgf program with a view to moving the economy to a higher and sustainable growth path. substantial progress has been made in implementing an ambitious agenda of reform measures. a composite strategy is being pursued to mitigate the risks arising from the scheduled phasing out of mfa quotas at end - 2004. some differences, which are inevitable in a democracy, should not make the international community feel that the country ’ s commitment to economic reforms is lagging. bangladesh values the financial and technical assistance from the international community. bhutan continues to experience strong macroeconomic performance with a robust real gdp growth and subdued inflation. keeping in view the strategy to benefit from integration with the rest of the world and through membership of multilateral bodies including the world trade organization ( wto ), bhutan is undertaking important structural reforms and strengthening the institutional framework. crisis prevention and imf surveillance across the membership : priorities, tools and modalities we welcome the initiatives taken by the imf to strengthen the overall framework of bilateral and multilateral surveillance. the recent initiatives undertaken by the fund including the proposal to integrate the ‘ balance sheet approach ’ into fund operations, the proposal to redesign the framework for debt sustainability in low - income countries and the recent decision to further strengthen data provision under imf ’ s article viii section 5, reflects the fund ’ s commitment towards adopting an effective framework for vulnerability assessment. while the above measures will help member countries to strengthen their statistical systems and for the fund to enhance the value of country - specific information system, it is essential to emphasize that the cooperative and voluntary nature of data provisioning as laid down under the article needs to be preserved. for strengthening surveillance, we welcome the thorough analysis of its various dimensions proposed for the next biennial review, including an impact analysis in select countries. we welcome a separate study on impact analysis. there is an increasing feeling that the framework of surveillance should be more focused in

the benchmark prime lending rate ( bplr ) system ( 2003 ), the base rate system ( 2010 ), and the present marginal cost of funds based lending rate ( mclr ) system ( 2016 ). let me explain these interest rate setting regimes briefly, before i turn to an assessment of the performance of the ( legacy ) base rate and ( prevalent ) mclr systems. in india, as in a number of other countries, a large proportion of loans is at floating rates, i. e., the interest rate charged to the borrower keeps changing depending on the reset periodicity. the floating rate is linked to some “ benchmark rate ” ( which ideally varies over time in consonance with the changing macroeconomic and financial conditions and, in particular, the central bank ’ s policy rate ). banks also charge a spread over the benchmark to factor in term premia and credit risk, among other factors. the actual lending rate is the benchmark plus the spread. the benchmark could be internal or external ; an internal benchmark will be based on elements which are in part under the control of the bank such as cost of funds, while an external benchmark is outside the control of the bank ( for example, it could be market determined rate such as certificate of deposit rate or treasury bill rate or inter - bank offer rate, or it could simply be the central bank ’ s policy rate ). the virtue of an external benchmark is that it is transparent, common across banks, and borrowers can compare various loan offers by simply comparing spreads over the benchmark ( all else, such as maturity of the loan, being equal ). as market rates normally move in line with the central bank ’ s policy rate, an external benchmark is globally considered and adopted as more appropriate than an internal benchmark for transmitting monetary policy signals. in india, the reserve bank has provided the banks flexibility to use both the internal and external benchmarks, but the banks seem to have preferred internal benchmarks over external benchmarks on two key grounds : first, the internal benchmark reflects their cost of funds, and second, it has been perceived that there have not been until recently any robust and vibrant external benchmarks. in october 1994, when the reserve bank deregulated lending rates for credit limits over ` 2 lakh, banks were required to declare their prime lending rates ( plr ) - the interest rate charged for the most creditworthy borrowers - taking into account factors such as