segments. we can achieve explosive growth if banks are able to customize and deliver cost effective products and services to this customer segment while simultaneously guiding and providing handholding support to these sectors. the fear of increase in npas cannot be a ground for depriving these sectors of timely and adequate credit. besides translating into increased business opportunities for banks, these sectors can significantly contribute to employment generation and growth in savings, and would support gdp growth. there is also a need to encourage incubation and development of new business ideas and providing funds to translate these into reality. facebook would not have been a reality if angel investors reid garrett hoffman and peter thiel had not funded mark zuckerberg. according to a bcg india study, india has 190, 000 millionaires but only about 500 angel investors. the hnis in india prefer to invest in real estate. while venture capital funds, to some extent, do provide funding to start ups, much more needs to be done to develop a viable ecosystem where new ideas with potential for employment and wealth generation can flourish. banks could consider providing funding to such innovations. attitudinal changes success demands change in the way banks do business, harness the power of innovation, recognize the huge potential at the bottom of the pyramid and reach out to them. banks need to go the extra mile in financial literacy by educating the customers and understanding the ecosystem in which small businesses and agricultural operations grow and thrive. they need to learn to work in a partnership to finance sustainable business. success is not about financing seemingly safe large corporates by following the herd in a “ me too ” manner. it is about changing mindsets, looking at untreaded paths, putting the customer above all and tapping the power of technology. this demands a committed workforce with the requisite technology, hr and risk management skills. it calls for re - skilling the existing workforce and hiring and retaining talent in the public sector, particularly, in view of the large scale retirements over the next few years. psbs would have to increasingly look at performance management, changing mindsets and empowering employees for fast and effective decision making. it requires a cultural revolution in the banking sector, particularly for public sector banks if they wish to retain the competitive advantage of size over the smaller but more nimble footed private sector / foreign banks. regulatory / supervisory environment one of the essential pre - requisites for attaining sustained growth is financial stability, which in turn requires a combination of strong regulation and supervision

systemic risk frameworks, would have to be identification of where the risks lie. 36. let me conclude by underlining some of the broad issues that would need to be addressed in the indian context going forward : a. how to strengthen capital requirements for market risk when most banks are on standardised approach? the basel iii regulatory initiatives under market risk are largely focussed on the internal model based approach. banks in india are currently on the standardised approach and in any case, most of the banks would continue to remain under the standardised approach. there is, therefore, a need to address the upgradation of the standardised approaches also. we are considering calibrating the capital requirement under standardised approaches with the available data for market risk. b. how to strike a balance in regard to fee - based revenue streams of banks? while non - interest income does offer diversification benefits, it may not necessarily be less risky than conventional loans. apart from the financial risks, there are significant reputational risks, particularly when banks engage in distribution of third party products. there cannot be rule - based prescriptions in this regard. but it would be imperative for the bank boards to closely understand the underlying risks, assess whether returns are commensurate with the risks and monitor such businesses of banks. for the market discipline to work, increased, granular disclosures of fee based income may have to be looked into. c. how to address conflicts of interest in banks ’ lending relationships and capital market activities? can the chinese walls be really effective in ensuring real separation of these activities within a bank? this issue is also relevant in respect of banks ’ being allowed to trade on exchanges for clients. d. how to strengthen the rating regime? the rating requirements in india are essentially driven by regulatory policies applicable to exposures of the regulated entities to various asset classes. it would therefore be imperative that the rating methodology employed for such activities is looked into by the regulator concerned. bis central bankers ’ speeches the rating agencies are supposed to adopt a through the cycle approach while assigning ratings. the regulators will need to modulate the risk weights applicable to the external ratings dynamically as per their assessment of systemic risk. towards strengthening the framework for cras, the system needs to shift away from issue - rating to issuer rating – the rating assigned to a particular instrument cannot be taken as reflective of the credit risk of the issuing entity. e. how to address excessive collateralisation of balance sheets? in view of the