raghuram rajan : tolerance and respect for economic progress convocation address by dr raghuram rajan, governor of the reserve bank of india, at the iit delhi convocation, delhi, 31 october 2015. * * * thank you very much for inviting me back to the institute to deliver the convocation address. i graduated with a degree in electrical engineering 30 years ago. i was overly anxious then about what the future held for me, because i did not realize that the institute had prepared me so well for what lay ahead. our professors – and i will not single out any to avoid a disservice to those i do not name – were dedicated professionals. they asked a lot of us, knowing that in challenging us they allowed us to learn what we were capable of. equally important, our electrical engineering class – in those days, computer science was part of electrical engineering in iit delhi – had some of the smartest people it has been my privilege to know. after working with them as colleagues, and competing with them for grades, i learned what it took to succeed in the fiercest environments ; very hard work, friendship, and boatloads of luck. those lessons have stayed with me since. iit delhi then, as i am sure it is now, was not only about studies – it was about growing up. we were, with a few notable exceptions, the proverbial school nerds who had been excluded from all school sports by the macho sports cases. with almost everyone in the same boat at iit, for the first time in our lives we got a chance to bat and bowl at the nets, instead of being posted at deep long on to retrieve the odd six by the stars. everyone did something, ranging from photography to publishing. of course, we all aspired to join dramatics, where you got to spend long hours with members of the opposite sex. unfortunately, i was no good at acting, so i had to look for self - actualization elsewhere. but there were enough places to look. student politics was vibrant, with plenty of scheming, strategizing, and back - stabbing. it was an intellectual pastime, however, without the violence and corruption that plagues student politics elsewhere in our country. you had to convince the small intelligent electorate to vote for you, and in figuring out how to get that vote, we all learnt the art of persuasion. so we grew up in the classrooms, in

was becoming a major cause for concern for the financial as well as the real sector, a framework for revitalizing distressed assets in the economy has been implemented with effect from april 1, 2014. the framework lays down guidelines for early recognition of financial distress, information sharing among lenders and co - ordinated steps for prompt resolution and fair recovery for lenders. it envisages centralised reporting and dissemination of information on large credits, early formation of lenders ’ forums and incentives for lenders and borrowers to agree on resolution and disincentives for both in the event of failure to act in a timely way. improvements in the current restructuring process such as an independent evaluation of large value restructuring with a focus on viability and fair sharing of gains and losses between promoters and creditors have been mandated. finally, a more liberal regulatory treatment of distressed asset sales, particularly to asset reconstruction companies, has been provided. it proposes to bring non - bank lenders also under its ambit for enhanced effectiveness. x. the basel committee issued the principles for sound stress testing practices and supervision in may 2009. in tune with these principles, the extant reserve bank guidelines on stress testing have been updated. stress testing which is based on forward looking approach is expected to provide a complementary and independent risk perspective to other risk management tools such as value - at - risk ( var ) and economic capital and complement risk management approaches that are based on complex, quantitative models using backward looking data and estimated statistical relationships. xi. with the objective of building up a buffer of capital which can be used to achieve the broader macro - prudential goal of restricting the banking sector from indiscriminate lending in the periods of excess credit growth that have often been associated with the building up of system - wide risk, the reserve bank has proposed to create a countercyclical capital buffer ( cccb ) framework for banks in india. the proposed draft cccb framework in india is based upon the credit - to - gdp gap in conjunction with other indicators like gross non - performing assets ( gnpa ) growth. the cccb shall increase linearly from 0 to 2. 5 per cent of the risk weighted assets ( rwa ) of the bank based on the position of gap between 3 percentage points and 15 percentage points. xii. the reserve bank is keen to introduce a countercyclical provisioning approach with the objective of building up provisioning buffer for the banking system when the bis central bankers ’ speeches banks in general