as the large rural population assumes significance. these pockets hold promises of substantial growth prospects and today with networking capabilities being available at much higher reliability levels than before and at affordable costs, banks may have to pay attention to these segments of the country as well. to achieve all these, banks will also have to re - orient their internal processes and procedures. just as mechanisation of processes in a manufacturing company required changes in the steps involved in the production cycle, suitable changes in the job processes within banks will also have to be made. no technology implementation is complete without the attendant changes in the basic way of process functions at the organisation where such implementation shave been made, and if technology implementations have to be successful, they have to be accompanied by suitable changes in the process flows across all sectors of the economy, which is at the base of business processing re - engineering. it is essential that banks embark upon business process re - engineering in a large scale and preferable even before the large scale implementation of technology has commenced. the management of external relationships is another requirement which would have to be taken care of by bankers of the future. convergence of the services of more industries and organisations is emerging so as to provide holistic service offerings to the discerning customer, and banks would be the prime target by customers if they have to provide service levels which match their expectations. this would necessitate that banks operate in an environment which will facilitate ease of interoperability. just as inter - operable it systems and straight through processing ( stp ) will become the order of the day, inter - operable business domains will also prevail and banks have to overcome this challenge in their stride. this will also be observed in managing external functions such as business process outsourcing, management of it service providers and better vendor management - all of which are hitherto unknown domains for the banks ’ personnel. the challenges staring at banking today need not result in a feeling of inadequacy. the i t framework in india is on strong ground and the industry has been showing significant growth rates in the previous years, with the financial sector having benefited immensely from the offerings of it. banks, for their part, have proved their mettle and i must add that in the few years since liberalisation, banks in india have proved that they can not only withstand the forces of change but blend the changes gracefully in such a manner as to even provide a challenge to the hitherto existing leaders in the line of business

gap is still unlikely for the time being even though the economy has stopped deteriorating. this report was written based on data and information available when the bank of japan monetary policy meeting was held on may 18, 1999. the bank ’ s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on may 18 as the basis of monetary policy decisions. furthermore, the decline in wages is likely to continue exerting downward pressure on prices. under such circumstances, prices are expected to remain weak. in the financial markets, the overnight call rate has stayed at nearly zero, and confidence about the availability of liquidity is growing among many financial institutions. interest rates on term instruments are declining further, reflecting the market ’ s view that monetary easing will continue for some time. moreover, the japan premium has almost disappeared. long - term interest rates, on the whole, have declined against the background of no clear signs of economic recovery and the decline in term interest rates. stock prices have been firm reacting to the further rise in u. s. stock prices since march. the amount outstanding of funds in the call money market has been gradually decreasing. to date, this has not led to any difficulty in funds settlement, but close attention should be paid to future market developments. with regard to corporate finance, credit demand for economic activities such as fixed investment remains weak. firms ’ moves to increase their on - hand liquidity in the face of difficult fund - raising conditions are settling down. as a result, credit demand in the private sector has weakened further. private banks have basically retained their cautious lending attitude. however, they are no longer constrained by severe fund - raising conditions and insufficient capital base. under these circumstances, major banks have started to extend loans more actively than before, especially for projects involving relatively small credit risks, and their lending stance is gradually becoming positive. as a result of these developments, credit conditions, which tightened previously, have eased somewhat. the situation continues to warrant careful monitoring on the extent to which private banks will ease their lending stance, and how this change will affect firms ’ propensity to invest.