financial sector. there is an inter - regulatory financial stability and development council ( fsdc ) which has oversight over the entire financial system and coordination is secured by a sub - committee of the fsdc headed by the governor of the rbi. banking sector first, let me turn to the banking system. typically, india's banking system is summarily described as preponderantly publicly owned and heavily public policy intervened. in practice, it is more vibrant, with 12 public sector banks facing keen competition from 21 private banks, 45 foreign banks, and 63 niche banks1 catering to specific needs and clientele. it is important to note that all constituents of the banking system are subjected to the same regulatory regime, with specific modulations for the niche and local banks in terms of sources and uses of funds. it is noteworthy that india has not faced a financial crisis of the scale and severity of the asian crisis of 1997 - 98 or the latin american crisis of 1980s and 2002 or the global financial crisis ( gfc ) of 2007 - 08 although its suffered knock - on effects from each of them. financial perturbations have happened in india though, but they were more local in character and essentially a manifestation of pro - cyclical exuberance. as the indian economy emerged out of recessionary conditions in 2001 - 02 and an economic upswing took hold, it spurred a credit boom to fund infrastructure expansion. masked by lax credit standards and opaque asset quality recognition, it was punctured by the onset of the gfc. india was among the earliest countries to bounce out of the 2 / 7 bis - central bankers'speeches gfc, and aspirations of double - digit growth fuelled another burst of bank credit - led infrastructure and heavy industry investment. on the premise that infrastructure involves long gestations, bank loans were allowed to be restructured while treating them as standard advances in banks'books with insufficient provisioning. in 2015 - 2016, deep surgery in the form of asset quality review ( aqr ) was undertaken and the true quality of banks'assets began to emerge. with the proper recognition of restructured loans, provisioning requirements, especially of public sector banks, surged. a revised prompt corrective action ( pca ) framework involving thresholds on capital, asset quality, profitability and leverage was imposed from 2017 in the form of restrictions on lending, dividend - distribution, and branch expansion, apart from requirement of higher provisions. at the peak, 12 banks were

the effects unfold in a certain order. from firms ’ perspective, it is not easy to reduce the number of regular workers once increased and it is difficult to reduce wages once raised. therefore, in general, increases in employment tend to start in the form of additional non - regular workers being hired, and wage increases tend to take the form of increases in special cash earnings such as bonuses or in non - scheduled cash earnings. while the year - on - year rate of change in scheduled cash earnings had been on a downtrend reflecting the increase in the share of part - time workers in total employment, scheduled cash earnings stopped declining in may this year and started to increase in june. real wages had been declining until recently. however, excluding the direct effects of the april consumption tax hike, the year - on - year rate of change in real wages turned positive for full - time workers in june and for part - time workers in july ( chart 12 ). once future economic prospects and the outlook for firms ’ profits become more favorable as the virtuous cycle among production, income, and spending continues, it is likely that wages will rise steadily in line with or above the rate of inflation. for this to happen, it is important to bis central bankers ’ speeches continue with the appropriate conduct of monetary policy measures to achieve the price stability target in a stable manner. d. inflation expectations and prices as mentioned earlier, in order to put downward pressure on expected real interest rates it is necessary to work on people ’ s inflation expectations. under 15 years of protracted deflation, there was a growing share of younger people who had never experienced inflation, and the view that prices will not rise had become entrenched in people ’ s mindset. dispelling such a deflationary mindset and changing people ’ s expectations so that they expect moderate inflation is quite a difficult challenge. that is why the current large - scale monetary easing had become necessary. various surveys and market indicators point to a general uptrend in people ’ s inflation expectations ( charts 13 and 14 ). this can be attributed to the fact that the impact of qqe on inflation expectations has been spreading. in addition, this uptrend also reflects an increase in the number of people who had been reluctant to believe that japan would experience inflation until they saw it and who are now adjusting their expectations. such skeptics have adjusted their expectations due to the rise in actual inflation reflecting the improvement in the output gap. this