have been set up recently. it is our intention to place the reports of the groups on money market, government securities market and forex market in the public domain soon. hence, the subject of the sixth annual conference is both well - timed and significant for us. to justify my presence here, let me take this opportunity to mention some of the recent developments which should be kept in view in the deliberations of the conference. first, under the provisions of the fiscal responsibility and budget management act, 2003, the reserve bank will not be participating, in the normal circumstances, in the primary market for the government securities from the start of 2006 - 07. the technical group that i referred to is currently working on the operational, technological and institutional aspects of this. hence, the market perspectives on the implications of this development can best be articulated in the conference today. second, the twelfth finance commission has made certain recommendations which would mean that the state governments would approach the market instead of obtaining loans from the government of india. several operational and other issues will have to be addressed in the management of the borrowing programme of the state governments, in future. we are convening a conference of the state finance secretaries on 8th april 2005, which will be addressed by dr. c. rangarajan, chairman, economic advisory council to the prime minister and the former chairman, twelfth finance commission, to discuss these issues. the road map that this conference would indicate in this regard will be helpful for our discussions and further policy formulation in regard to debt - papers of the state governments. third, the central government budget has proposed a special purpose vehicle ( spv ) for raising resources for investment in infrastructure. the issuance of debt - paper with relatively longer maturity, outside the government of india ’ s normal borrowing programme, is yet another recent dimension added to the debt - market developments in the country. finally, several legislative changes on the anvil provide new opportunities for further development of fixed income markets. for example, the long awaited government securities bill is at an advanced stage of processing. the finance minister, in his budget speech, announced the intention of the government to bring about amendments to the rbi act and the banking regulation act and the amendments relating to statutory pre - emptions could have implications for fixed income markets. in this context, it is useful to recognise that the stake of the rbi in the fixed income and derivatives market arises on account of several reasons. first, rbi as a monetary authority is most concerned with

presently enjoying may not be sustained in the future when the interest rate cycle reverses, whenever that happens in future. external benchmark linked loans will be repriced much faster than deposits contracted during the peak of the interest rate cycle resulting in pressure on nims and eventually profitability. therefore, apart from interest rate risk in the trading book, banks must be mindful of the interest rate risk in the banking book as well. on the liabilities side, banks must endeavour to proactively manage the pricing and duration of their deposits while trying to diversify the sources and optimising the product mix of deposits. excessive reliance on bulk deposits should be avoided as these are more sensitive to interest rate movements and perpetuate concentration risk while also eroding earnings. business models 2 / 5 bis - central bankers'speeches as recent global events have demonstrated, sometimes, even business models once perceived as safe can fail. therefore, banks need to remain alert to the risks inherent in their business models and mitigate them in a timely manner. in good times like this, financial institutions must review their growth plans while putting in place adequate risk management systems to handle the emerging risks. it is imperative for boards of banks and nbfcs to fix suitable sectoral and sub sectoral exposure limits and monitor them closely to avoid any sectoral concentration, adverse selection or dilution of underwriting standards. the growing collaboration between banks, nbfcs, and fintechs is driving innovation in products, services, and business models. an important consideration is the cautious adoption of model - based lending through analytics. banks and nbfcs should exercise caution in relying solely on preset algorithms, ensuring that these models are robust, regularly tested, and recalibrated as needed to maintain robust underwriting standards. operational resilience in view of the ever - increasing adoption and usage of digital channels by members of public, it has become imperative for banks and payment system participants to ensure uninterrupted availability of various online and mobile banking channels at all times. recently, there have been a few incidents of unscheduled downtimes inconveniencing several customers. it is also observed that many banks have not been spending fully, the budget earmarked for procurement of it systems and it security systems. banks have to proactively commit adequate resources for augmenting their it infrastructure, commensurate with their business plans and also monitor them for their continued availability and stability. banks and