macro - economic management to become more robust, large scale fiscal consolidation resulting in optimal debt structure, bond markets becoming more liquid and deep, host of reforms in derivatives space and central bank communication becoming more robust and effective. i would like to share some of my thoughts on the issues. i. debt management : medium term debt strategy 20. recently we have articulated, in consultation with the government, our medium term debt management strategy ( mtds ). the move was designed to benchmark our debt management practices with global sound practice and foster transparency and accountability. mtds comprises objectives, various benchmarks and portfolio indicators and yearly issuance strategy ( external and domestic funding, instruments, maturity structure, etc. ). it provides requisite information, transparency & certainty and enables market participants ( investors ) to plan their strategy for investment in government bonds market. 21. the mtds has been articulated for a period of three years and it will be reviewed annually and rolled over for the next three years. the scope of debt management strategy is presently limited to active elements of domestic debt management, i. e., marketable debt of the central government only. over time, the scope would be progressively expanded to cover the entire stock of outstanding liabilities including external debt as well as general government debt including state development loans ( sdl ). 22. the debt management strategy revolves around three broad pillars, viz., borrowing at low cost over a period of time, risk mitigation and market development. the intended process as part of mtds entails the following : • carrying forward transparent issuance process by providing clear information on borrowing programme to investors and having continuous investor interactions and appropriate consultation ; • building up benchmark issues by issuing significant volumes and taking advantage of liquidity premia ; • elongating the maturity of the debt portfolio ; • building a balanced maturity profile and supply along the yield curve ; • issuing a variety of instruments, such as, inflation linked bonds that would help the investors to manage their portfolio more efficiently ; • undertaking switches / buybacks for effective liability management ; • expanding the domestic investor base by encouraging retail and mid - segment investors ’ participation in g - sec market and calibrated opening of the government securities market to foreign investors and retail investors ; and • continuing passive consolidation with large benchmark issuances and active consolidation through buy - backs / switches / conversions. bis central bankers ’ speeches 23. an important risk mitigation measure aimed at alleviating the pressure at short -

extension of time for completion of projects has been allowed subject to certain conditions without change in classification of the loan. limited cost overrun financing has also been allowed. 2. banks are permitted to issue guarantees favouring other lending institutions in respect of infrastructure projects, provided the bank issuing the guarantee takes a funded share in the project at least to the extent of 5 percent of the project cost and undertakes normal credit appraisal, monitoring and follow up of the project. in other cases, banks are precluded from issuing guarantees favouring other banks / lending institutions for the loans extended by the latter, as the primary lender is expected to assume the credit risk and not pass on the same by securing itself with a guarantee i. e. separation of credit risk and funding is not allowed. 3. normally promoters ’ contribution towards the equity capital of a company should come from their own resources and they should not normally grant advances to take up shares of other companies. however, banks have been permitted to extend finance for funding promoters ’ equity in cases where the proposal involves acquisition of shares in an existing company engaged in implementing or operating an infrastructure project in india, subject to certain conditions. 4. banks have been allowed to structure loans flexibly, ( what is called as the 5 / 25 scheme ) so 2 / 5 bis central bankers'speeches that the repayment schedule is aligned with the cash flows. 5. banks can raise funds from the market by way of infrastructure bonds, and the assets financed by such funds are exempted from the priority sector lending requirements and the funds raised are exempted from reserve requirements. more recently, we have allowed banks to raise such funds by way of masala bonds, as well 6. an efficient bond market is an important requirement for raising funds for the infrastructure sector. this will de - risk the banks ’ balance sheets as well. we are taking several measures in this regard. as a part of this we have allowed banks to provide credit enhancement for bond issuances, subject to certain conditions. in fact we have more recently allowed banks to jointly provide ce up to 50 percent of the bond issue. 7. cost of funds is an important element for infrastructure. at the same time, the financiers at the pre - construction stage need to be compensated for construction risk. important measures like allowing setting up of idfs, both as nbfcs and mutual funds, to take over the post construction assets from banks, allowing take out financing etc., have been taken