financial services market, financial institutions are increasingly acknowledging the need for new perspectives and paradigms in financial services. 26. one more onslaught on banks existence is the net effect of regulatory requirements on capital and leverage and market and public expectations on their capability to leverage their capital. banks by definition, as we know of all these days, are the highly levered institutions. however, if we go by these factors about which just now i mentioned – viz., regulatory capital, market and public expectations – we should be dropping the definition of banks being ‘ highly levered ’ institutions. if we add the capital requirement as per tlac prescriptions, bankers ’ usual cautionary additional capital, yet another add on as per the public expectation as a fallout of stress test assessments, i am afraid, we will end up banks having a debt equity ratio of about 4 : 1, which is not too different from highly levered corporates. that ’ s one of the reasons why we are very cautious and hesitant about supporting tlac whole hog. bis central bankers ’ speeches 27. therefore, the clear prognosis is that either the banks will be dead or at least the banks of the future are not going to be the banks of yesterdays and todays. what to do? 28. i regret that at the very end of these two days deliberations on future of banks, i have to paint such a dismal future for your existence as banks. my point is we have to recognize the realities of the day, the compulsions of the new driving forces that demand a new paradigm in banking and reflect on future course of action. 29. there are hopes. first is to take full advantage of the technological developments and enmesh in them to meet the customer expectations. the new consumer is addicted to connectivity, convenience and freedom. they want not just value added services, but such services anytime anywhere anyhow – so nicely said by derrydean dadzie the chief doer of dreamoval ltd. 30. another prescription by some like hennie bester, jeremy gray and david saunders suggests that while banks may have the urgent need to identify new avenues for growth and the need to embrace new information - based technologies, what is of paramount importance is a positive shift towards increased recognition of the social responsibility of the financial services providers. they argue that, ultimately, balancing profitability with customer benefit must remain at the heart of any new paradigm. 31. can you hear some ringing in the bell

subir gokarn : regulatory perspectives on derivatives markets in india keynote address by dr subir gokarn, deputy governor of the reserve bank of india, at the international options market association, world federation of exchanges annual conference, organised by the national stock exchange, mumbai, 4 may 2011. * * * inputs from sudarsana sahoo, edwin prabhu, rajib das, h. s. mohanty, nishita raje and g. mahalingam are gratefully acknowledged. introduction it is a pleasure for me to be speaking at this conference organized by the international options market association. the presence and role of derivatives in india, both otc and exchange traded, has been increasing steadily over the years. these instruments are an important component of the overall financial sector strategy and the broad regulatory objective is to ensure that they are used to their potential in ways that are consistent with both financial development and the contribution of financial markets to economic growth. i would like to begin by laying out a simple framework, which helps us think about financial sector development in terms of multiple objectives. this will provide a useful backdrop to the various issues relating to derivatives in india, which i will then go on to talk about. financial sector development can broadly be viewed as pursuing four objectives. efficiency : we can look at the notion of efficiency from two perspectives. for the provider of products and services, it means the ability to do this at the lowest possible cost, with the full benefit of technology and market infrastructure. for the user, efficiency relates to the availability of products and services which address his / her requirements at the lowest possible price. stability : from the viewpoint of the financial system, stability requires that aggregate risk is bounded in some way. this requires, in turn, that individual participants be required to mitigate and manage their own risks. however, in situations in which systemic risk goes beyond the aggregate individual risk, additional measures may be warranted. transparency : the basic premise is : “ what cannot be measured cannot be managed ”. the more market participants know about overall activities and outcomes, the better able they are to make their cost - benefit calculations and act on them, contributing to the overall effectiveness of the market. inclusion : financial development is not an end in itself. it serves the broader purpose of facilitating economic activity, through resource mobilization and risk management. the more accessible the financial system is to individuals in pursuit of these two objectives, the better. against this backdrop, i will address four