produced a sizable drain on the treasury ’ s coffers over time. as you are well aware, programs can be easy to initiate or expand, but extraordinarily difficult to trim or shut down once a constituency develops that has a stake in maintaining the status quo. in closing, i want to commend chairman domenici and the committee for your insistence on fiscal responsibility and for years of persistent effort. your work has contributed importantly to shrinking the budget deficit and bringing surpluses within sight. these projections of surpluses, which are based on an extrapolation of steady economic growth and subdued inflation over the coming years, implicitly assume that monetary and fiscal policymakers will remain attentive to potential sources of instability. if this is the scenario that, in fact, unfolds and the budget moves into surplus within the next few years, the increase in national saving will pay off handsomely in preparing our economy and our budget for the challenges of the twenty - first century.

bank of india are : ( 1 ) the nascent stage of development of the credit derivatives market ; ( 2 ) regulatory guidelines on securitisation do not permit immediate profit recognition ; ( 3 ) perseverance of prudential policies which prevent institutions from excessive risk taking and financial markets from becoming extremely volatile and turbulent ; and ( 4 ) close co - ordination between supervision of banks and their regulation. future challenges to banking from the regulatory perspective i would like to bring to the fore four issues that i consider very important for the future regulatory reform process not only in indian context but in the context of many emerging markets as we move ahead. first is the issue related to “ know your customer ( kyc ) ” in banks ; second, from a central banker ’ s perspective whether the banks are according “ fair treatment ’ to their customers ” ( ftc ) ; third, is the issue of “ risk management ” and its proper understanding and fourth is the leveraging technology for greater financial inclusion. let us discuss these four important issues in some detail now. know your customer ( kyc ) in all its manifestations first is the issue of kyc in banks and its importance in the overall enhancement in the functioning of the banks. sound kyc policies and procedures not only contribute to a bank's overall safety and soundness, they also protect the integrity of the banking system by reducing the likelihood of banks becoming vehicles for money laundering, terrorist financing and other unlawful activities. there are three components here. “ knowing their customers ” is not enough for banks, they should also know the “ business ” of their customers ; ( kybc ) and if the banks know the business of their customers, the banks must understand and assess the risks associated with each of their customers ’ businesses ( kycbr ). the banks should realize that these parts of know your customer in all their manifestations, viz. know your customer ( kyc ), know your customers ’ business ( kycb ) and know your customers ’ business risk ( kycbr ) is not only an integral part of elementary risk management process but it also makes a good business sense. regulatory intervention in this area is going to increase in future. fair treatment to customers ( ftc ) second issue is with regard to affording fair treatment to customers ( ftc ) by banks. this requirement is key to the operation of an efficient retail market for financial services. ftc is also central to consumers having confidence in the financial services industry. this principle