need to streamline the sector, to bring within its fold entities that should have, but have not, sought registration from the bank. these have been identified and suitable corrective action is underway. second, it has come to the notice of the bank that there are financial companies that have been accepting deposits from the public without authorisation from the bank. these again have been identified and the respective state governments are in the process of taking suitable action under the state protection of interest of depositors acts. third, the menace of unincorporated entities and fly by night operators accepting deposits need to be addressed in full earnest. the bank is strengthening its market intelligence efforts and the inter - regulatory coordination. the state level coordination committees ( slccs ), an inter - regulatory forum, has been strengthened, with the chief secretaries presiding over the slccs, and the frequency of such meetings has also been increased. the bank is also examining the need for a residual regulator which can address issues and products that are hybrid in nature and do not strictly fall under any financial sector regulator. some state governments have expressed the desire to act as residual regulator for the financial sector. this again, is work in progress. 36. in keeping with the work done on shadow banking by g - 20 and financial stability board, the reserve bank has been tasked with identification of shadow banking entities and activities in the country, putting in place a data gathering mechanism to ascertain the interconnectedness and the risks transmitted to the formal financial sector from shadow banks. this is a humongous task, as today there is little data available on say chit funds, both in the formal and informal sector, money lenders, and the like. an inter - regulatory group consisting of financial sector regulators, enforcement agencies and the concerned government ministries are engaged in this task. bis central bankers ’ speeches conclusion 37. in conclusion, may i emphasize that framing regulations is a public policy function and it retains a long term perspective ; though there may be some short term setbacks, the revised prudential regulations as detailed so far, including the strengthening of core capital, governance standards and disclosures, will strengthen the nbfc sector, make it more resilient to economic downturns, lower systemic risks and enhance stakeholder confidence. overall the reserve bank is confident that the recent regulatory changes will have a salutary effect on financial stability in the long run. it is hoped that these and other forthcoming changes in the pipeline, will further strengthen the

financial stability. india is no exception to this practice. the economist based its conclusion on the standard parameters such as current account, budget balance, inflation and increase in bank lending, for assessing the degree of risk and one cannot disagree with the relevance of these parameters in assessing risks. but, most of these risky elements have been a part of the functioning of the indian economy for several years, almost all through the reform period, and yet the economy exhibited macro - stability and impressive growth even while withstanding some significant domestic and global shocks. in view of this evidence, we need to explore a ) the reasons for such risks not materialising in our economy so far ; and b ) the measures needed, in future, for insulating the economy from such risks, to the extent feasible. the reform process in india, lays emphasis on appropriate sequencing of reforms. firstly, the reserve bank, in particular, has been treating reforms in financial and external sectors as means to broader objectives of accelerated growth with stability rather than as ends in themselves. secondly, reform in external sector makes a clear distinction between the costs and the benefits of trade liberalisation, and between the risks and rewards of capital account liberalisation. thirdly, a hierarchy in capital flows is recognised and management of capital account is advocated on that basis. fourthly, the pace and content of reform in financial and external sectors are calibrated after taking into account reforms in real, fiscal and public sector as a whole. these approaches to reform have had a salutary impact on the preparedness of financial institutions, financial markets, public policy and above all, public opinion to participate gainfully in the reform process. way forward, there is considerable merit in persisting with these approaches that have ensured macro - stability, while fine tuning them to the changing times and global challenges. reserve bank will, in regard to both growth and stability, continue to pursue its policy of being enlightened by theory, educated by global experiences, and conditioned by domestic realities without being bound by any particular ideology. a major area of vulnerability for us is the high consolidated public - debt to gdp ratio of over seventy percent and persisting, though moderating, consolidated fiscal deficit. the policies and practices in management of public - debt in india are acutely conscious of these and hence policies to mitigate risks on this account are carefully crafted by taking recourse to all the instruments at the command of the reserve bank in a coordinated manner. at the same time, reforms in government