externally rated securitization exposures, the elimination of certain “ cliff effects ” ( sharp increase in applicable risk weights ) associated with credit risk mitigation practices, and the incorporation of key elements of the iosco code of conduct fundamentals for credit rating agencies into the committee ’ s eligibility criteria for the use of external ratings in the capital framework. transition and phase - in in view of the large scale reforms and their impact, basel iii will be phased in and implemented over a long period of time, staring from january 1, 2013 to january 1, 2019. capital instruments that no longer qualify as non - core tier 1 capital or tier 2 capital, will be phased out over a ten - year period starting from 2013. the final calibration of liquidity ratios and leverage ratio will be made after further quantitative impact study and observation. macroeconomic impact of basel iii assuming that banks may be able to raise the increased capital requirement under basel iii from the market, questions have been raised as to its impact on economic growth and profitability of banks. in general, the increase in equity capital requirement is likely to increase the weighted average cost of capital. banks would partly pass on the increase cost of capital to the borrowers as higher lending rates. thus, the equilibrium lending rates are likely to be marginally higher and as a consequence, credit growth could be a little lower than in the last few years. however, the important question is how much? also, after the steady state has been reached on full implementation of basel iii, whether the cost would come down? i would try to provide some answers to these questions based on the research done by the official sector including the basel committee, and non - official or private sector institutions. the bank for international settlements ( bis ) and the fsb, with a view to phase - in the new regulations in a manner that is compatible with the global economic recovery, undertook studies to assess the macroeconomic impact of the transition to higher capital and liquidity requirements. the macroeconomic assessment group ( mag ) set up by the basel committee and fsb has estimated that bringing the global common equity capital ratio to a level that would meet the agreed minimum and the capital conservation buffer, would result bis central bankers ’ speeches in a maximum decline in gdp, relative to baseline forecasts, of 0. 22 %, at the end of basel iii implementation period. the estimated maximum gdp impact per percentage point of higher capital was 0. 17 %. in addition, the basel

returns to the various wings of the regulator. in this regard implementation of xbrl ( extensible business reporting language ) in the banking and financial system is a welcome sign as it will not only help in regulatory compliance but also act as an effective tool for management information system ( mis ) within the organisation. in general, xbrl reduces the cost of analyzing and reporting business information, helps in effective mis and increases the speed and efficiency of business decisions. xbrl as we all know is a standard based electronic format for communication of business and financial data which provides a lot of benefits in the preparation, analysis and communication of business information in different formats ; extraction and automatic exchange of the financial data ; and enhancing the usability and transparency of financial information reported under existing accounting standards. this is helpful in preparation of not only financial statements like balance sheet, profit and loss accounts, flow of funds or financial disclosures, etc. but includes any type of financial reporting, like basel ii system, statutory reporting, regulatory or supervisory reporting systems. future prospects and way forward the downturn in the bfsi sector overseas may prove to be an advantage for the indian financial system as availability of highly skilled people at a reasonable cost in view of employment cuts abroad may propel india for high speed growth in all the sectors. the itbpo industry is expected to grow at a reasonable rate of around 16 per cent in india. this opportunity may churn out another set of dynamic entrepreneurs and intrapreneurs ( term coined by gifford pinchot ) who would lead the march for business transformation and provide opportunities for sustained growth of the financial system. for indian banks and financial institutions in india the issue is not of pruning it programs but making these more cost effective and revenue generating. india ’ s value proposition in the financial sector i believe will continue to be strong and even in the current context it may provide support in the re - structuring of the work - processes, products and may be the institution itself, thereby fulfilling the growth sustenance objectives of the institutions. this period also provide excellent opportunities and avenues for the banks and the financial institutions to reach out to the people in the rural and semi - urban areas and bring them under the fold of our banking and financial system. the percentage of no - frills account holders and coverage of people under the banking umbrella is still miniscule. this prospect in fact throws a lot of opportunities for the technology driven initiatives to expand the coverage of the indian