most emerging markets, banking sector assets comprise well over 80 per cent of total financial sector assets, whereas these figures are much lower in the developed economies. furthermore, deposits as a share of total bank liabilities have declined since 1990 in many developed countries, while in developing countries public deposits continue to be dominant in banks. in india, the share of banking assets in total financial sector assets is around 75 per cent, as of end - march 2004. there is, no doubt, merit in recognising the importance of diversification in the institutional and instrument - specific aspects of financial intermediation in the interests of wider choice, competition and stability. however, the dominant role of banks in financial intermediation in emerging economies and particularly in india, will continue in the medium - term ; and the banks will continue to be “ special ” for a long time. in this regard, it is useful to emphasise the dominance of banks in the developing countries in promoting non - bank financial intermediaries and services including in development of debt - markets. even where role of banks is apparently diminishing in emerging markets, substantively, they continue to play a leading role in non - banking financing activities, including the development of financial markets. third, internationalisation of banking operations : the foreign controlled banking assets, as a proportion of total domestic banking assets, increased significantly in several european countries ( austria, ireland, spain, germany and nordic countries ), but increases have been fairly small in some others ( uk and switzerland ). amongst the emerging economies, while there was marked increase of foreign - controlled ownership in several latin american economies, the increase has, at best, been modest in the asian economies. available evidence seems to indicate some correlation between the extent of liberalisation of capital account in the emerging markets and the share of assets controlled by foreign banks. as per the evidence available, the foreign banks in india, which are present in the form of branches, seem to enjoy greater freedom in their operations, including retail banking, in the country on par with domestic banks, as compared with most of the other developing countries. furthermore, the profitability of their operations in india is considerably higher than that of the domestically - owned banks and, in fact, is higher than the foreign banks ’ operations in most other developing countries. india continues to grant branch licences more liberally than the commitments made to the wto. fourth, the share of state - owned banks in total banking sector assets : emerging economies,

move out of controls and micro - regulation. as already mentioned, banks are special in emerging markets since they take a leading role in development of other financial intermediaries and of financial markets, apart from having a large recourse to public deposits. no doubt, there is nothing like an ‘ optimal ’ level of governance for one to be satisfied with. the objective should be to continuously strive for excellence. the rbi has, on its part, made significant efforts to improve governance practices in banks, drawing upon international best practices. it is heartening to note that corporate governance presently finds explicit mention in the annual reports of several banks. the improved corporate governance practice would also provide an opportunity to accord greater freedom to the banks ’ boards and move away from micro regulation to macro management. banks in india are custodians of depositors ’ monies, monies of the millions of depositors who are seeking safe avenues for their hard earned savings, and hence, banks must accept and perform an effective fiduciary role. in this light, improvement in policy - framework, regulatory regime, market - perceptions, and indeed, popular sentiments relating to governance in banks need to be on the top of the agenda to serve our society ’ s needs and realities while being in harmony with the global perspective. thank you.