it is optimal, in the interest of financial stability, to entrust the function of regulation of banks and non - banks also to central banks. the argument is that only the monetary authority, as the lender of last resort, can provide emergency liquidity support. also, being the regulator, the monetary authority gets a better sense of the market conditions and can therefore manage liquidity more efficiently. but this model raises fresh questions. in particular, can the central bank have exclusive responsibility for financial stability? conversely, can the government completely delegate this responsibility to the central bank under a principal - agent model? consider, for example, a situation where the banking system is under threat of instability. decisions have to be made on which banks to bail out and how much support to extend. in all this, fiscal support may need to be extended. would a government, especially if it is democratically elected and accountable to a legislature, not want to have a say in this regard? this calls for the following question to be resolved. how should the responsibility for financial stability be shared between the government and the central bank? what should be the protocol for decision making? who should prevail, and under what circumstances, in the event of a deadlock? third challenge : growth and financial stability – managing the trade - offs in order to safeguard financial stability, we have traditionally used a variety of prudential measures such as specifying exposure norms and pre emptive tightening of risk weights and provisioning requirements. but these measures are not always costless. for instance, tightening of risk weights arguably tempers the flow of credit to certain sectors, but excessive, premature or unnecessary tightening could blunt growth. similarly, exposure norms offer protection against concentration risks ; however, such limits could restrict the availability of credit for important growth sectors. this is a live issue in our country in the context of the immense needs of infrastructure financing. thus, as in the case of price stability, central banks face the challenge of managing the trade off between financial stability and growth. it needs to be recognized that after a crisis, with the benefit of hindsight, all conservative policies appear safe. but excessive conservatism in order to be prepared to ride out a potential crisis could thwart growth and financial innovation. the question is what price are we willing to pay, in other words, what potential benefits are we willing to give up, in order to prevent a black swan event? experience shows that managing this challenge, that is to determine

made valuable recommendations. these relate to : need for thrust on research and development activities with a clear focus on the areas of research that should be taken up in the next 3 to 5 years time ; revamping education and training activities with the aim to develop technically competent and in - house expertise in banks to efficiently supervise and manage technology - intensive resources like data centres, data recovery centres, corporate network, etc. ; becoming a member of global technology standard setting bodies active in the area of banking ; and developing a cadre of faculty focussing on technology requirements of the banking industry. 29. we are working on implementing these recommendations. 30. as i noted earlier, indian banks have come a long way in using technology to improve the reach and efficiency of banking. what they have done is laudable because they have adapted the best international technology practices to the indian situation. i want to compliment them for what they have achieved and for their efforts towards addressing the challenges on the way forward. task for idrbt 31. we are gathered here today to recognize outstanding performance in the use of technology in banking. hearty congratulations to the winners today. i hope these awards will encourage further innovations and competition towards improving efficiency. i also wonder if we can benchmark banks ’ performance in the use and adoption of technology against some international standards, especially in the area of financial inclusion. i would urge idrbt to work on this. 32. finally, i want to compliment shri sambamurthy and his dedicated team of faculty and staff at idrbt for their important contributions to the financial sector. my thanks also to the members of the governing council of the institute whose expertise and guidance has been the backbone of idrbt ’ s performance and achievements.