a pilot project on smart cards has already been launched with sri visakha grameena bank in andhra pradesh, which has been one of the front - runner banks in financing self help groups ( shgs ). it is expected that with enhanced use of rural - oriented technology, the bank would be able to provide value addition to services offered to the rural clients and further expand its outreach in a sustainable manner. banks could consider the feasibility of using smart cards for the'no frills accounts'so as to help expand the coverage of the banking services and facilitate the garnering of the much - needed low - cost deposits. here again, the approach of sharing of it resources would have much to commend itself. technology and the government sector it would be appropriate to also outline certain aspects of application of technology to the government business since rbi is the banker to the central and state governments. if we scan the technology initiatives of the states, we find a large divergence in technology absorption across the states. while states like andhra pradesh, maharashtra, and karnataka are generally ahead of others in egovernance, this is just beginning to happen in the states like madhya pradesh, uttar pradesh, bihar and the north east. as far as central government receipts are concerned, the government's tax collection processes underwent a metamorphosis with the introduction of online tax accounting system ( oltas ) for direct taxes. enthused by the success of oltas, the central board of excise and customs, in consultation with the reserve bank, has introduced the easiest ( electronic accounting system in excise and service tax ) project which envisages a comprehensive e - payment module that can be utilised by the banks'corporate customers. the pilot project for this is in an advanced stage of completion. acceptance by the government of electronic challans, based on formats to be available on their web sites, would make the process tax - payer friendly. it would also substantially reduce paper usage, provide for straight through processing and obviate errors arising from the reconciliation process, wrong data entry, etc. another significant initiative taken in this sector by the reserve bank was the computerisation of state treasuries throughout the country. after detailed examination of the various aspects, steps are now underway for the establishment of electronic linkage amongst the state treasuries numbering 3022, agency banks, finance departments of the state governments, office of the accountant general and the reserve bank of india. this will help in

thus, the major aim for financial regulation and supervision is to foster the effective functioning of the financial system in order to enhance the ability to absorb shocks and maintain financial stability. financial instability arises as a result of shocks hitting the financial system, which impede with the payment system and, ultimately, affect the smooth running of business and trade. regulators and supervisors across the globe are charged with managing the health of banks and other financial institutions and preserving the stability of the financial system for two basic reasons : consumer protection and maintain financial stability. accordingly, the ultimate objective of any regulator is to ensure that the banking sector attends to its traditional role of a shock absorber to the financial system. the banking sector has to work towards mitigating any risk between the financial sector and the real economy. let me remind you that banks are also the channels through which the central bank transmits monetary policy to the economy. on this count, the central bank is definitely concerned with bank soundness for the effective transmission of monetary policy. in addition, thanks to its role as lender of last resort, the central bank is also compelled to have complete information on the financial soundness of 1 / 4 bis central bankers'speeches any bank that might call for emergency liquidity assistance. the route towards a framework for bank supervision and regulation can be traced back towards the end of 19741, when the then committee of banking regulations and supervisory practices was established by the central bank governors of the group of ten countries in the aftermath of serious disturbances in international currency and banking markets ( notably the failure of bankhaus herstatt in west germany ). the committee, headquartered at the bank for international settlements in basel, was established to improve the quality of banking supervision worldwide, and to serve as a forum for regular cooperation between its member countries on banking supervisory matters. starting with the basel concordat, first issued in 1975 and revised several times since, the committee has established a series of international standards for bank regulation, most notably its landmark publications of the accords on capital adequacy which are commonly known as basel i, basel ii and, most recently, basel iii.. it is surely not my intention to walk you through these various developments. in 1997, the basel committee issued the basel core principles for effective banking supervision, which have since been revised from time to time. these bcps are the very gospel of effective banking supervision as they provide the lifelines for a sound banking sector. bank supervisors naturally have to engage not only in off