##falls that limit growth and build on synergies and innovation for catapulting it into the future. the outlook for the global economy remains uncertain with green shoots of optimism in the us as fresh jobs were added, but the eurozone remains embroiled in uncertainty of decision making and lack of consensus with the battered economies unwilling to commit bailout funds to the troubled nations. india has been more fortunate in that it has emerged virtually unscathed from the global crisis. a combination of strong regulation and supervision and a will to evolve policies that lean against the wind helped insulate the indian financial system from the crisis. it helped too that the indian banks were not very sophisticated and excessively leveraged. however, in a world where financial systems recognize no boundaries and the fortunes of nations are intertwined, no nation can consider itself an island and remain immune to the changes in the tides of the world economy for a prolonged period. if the envisaged growth rate of 9 per cent per annum during the twelfth plan is to be achieved and banks have to remain competitive and continue to improve their margins, they would need to look at the new drivers of growth. bis central bankers ’ speeches i. key drivers for propelling indian banking sector a recent iba - ficci - bcg report, titled " being five - star in productivity - roadmap for excellence in indian banking " has projected that the domestic banking industry is set for an exponential growth in the coming years with its asset size poised to touch usd 28, 500 billion by the turn of the 2025 from the current asset size of usd 1, 350 billion ( 2010 ). it is fairly obvious to presume that scope for such growth rates would inevitably usher in more competition for the indian banks aided in part by regulatory impulses and increased openness of the indian economy. simultaneously, the reach and penetration of banking is going to increase tremendously due to the policy spotlight on inclusive growth and financial inclusion. aiding the transition would be another fortuitous transformation in human resources area. public sector banks which account for nearly three fourths of the one million people working in indian banks face the prospect of retirement of nearly 55 per cent of their people in the next decade. thus, if ever there was a time for right sizing the organisation, hire the right talent, the right skilling of the workforce and bring about a cultural transformation, the time is now. we are, therefore, on the cusp of a defining decade in banking history

to illustrate that for banks to move to the next orbit, they have to realise their true strengths and weaknesses. they need to build on their strengths and rectify their weaknesses to prepare and adapt themselves for the challenges which these external, regulatory and internal drivers are going to entail. in this, a very relevant and critical issue which emerges is whether the regulatory and supervisory processes are also geared up for the next orbit. iii. how equipped are the supervisors? the existing supervisory framework for commercial banks in india has fared rather well over the years and drawn praise from peer supervisory agencies, global standard setters and the fsap assessors for the regulatory and supervisory regime as the indian banking system remained largely stable during the global financial crisis. however, as supervisors, we face challenges. the growing complexities of the banking business coupled with significant cross - border and cross - sector expansion has rendered the system increasingly vulnerable to the threat of “ contagion ”. the paradigm shift in the banks ’ business processes, products and systems with an ever - growing reliance on ict, as delivery channels pose immense challenges before the banking supervisor. while on the one hand, the banking landscape has witnessed considerable changes, the supervisory processes within the reserve bank have remained more or less static. this has necessitated a review of the supervisory processes and rationalisation of the organisational structure for bank supervision. additionally, lessons from the financial crisis which have manifested in form of new regulatory and supervisory benchmarks like basel iii, revisions to the core principles for effective bank supervision, increased focus on systemically important banks also have to be factored in for making the supervisory processes and mechanism at the reserve bank more robust and capable of addressing emerging issues. the present supervisory processes followed by the reserve bank are focused on elaborate transaction testing and compliance monitoring and do not provide a forward looking measure of risk that the supervised entities pose to the supervisory objectives. we need to move away from transaction based to risk based and from incidence based to theme based supervision. the on - site assessment and the off - site surveillance processes also need rationalization so that efforts made by the external / internal auditors of banks could be effectively utilised and duplication avoided. supervision has to be intrusive and decisive. the basic underlying theme should be that supervision must facilitate good business and must obstruct bad business. another issue worth pondering is whether the reserve bank ’ s supervision adds value for the supervised entity or is it an “ unnecessary evil ” that they have to endure