as a first step, there could, however, be a broad agreement on the directions and the first principles that are most appropriate. emphasis on harmony in policies and search for co - operative solutions appears appropriate. ( c ) possible impact of global imbalances on india as highlighted by our finance minister during the recent adb annual meetings that apart from the impact on the real and external sectors, it is felt that the developments in the currency and capital market are intrinsically intertwined with the global imbalance and, therefore, in the eventuality of a disorderly correction, disruption in these markets in the form of large cross - currency volatility and sharp rise in interest rates are likely in the global economy. what could be the possible impact of less than orderly adjustment of global imbalances on the indian economy? india does not depend on the international capital market for financing the fiscal deficit and consequently to some extent adverse consequences of the global developments would be muted. however, there could be a spill - over effect of global developments on domestic interest rates and thus on fisc also. the fiscal position of the government could also be indirectly impacted through the nature of management of foreign exchange reserves held by the reserve bank. similarly, any abrupt adjustment in global imbalances may affect corporates, banks and households in india though the impact may be less than some other emerging economies. with respect to the impact on corporates, if there is widening of spreads due to a shift in investor confidence in the international markets, those corporates which have borrowed at variable rates may possibly suffer more than those, which have taken loans on a fixed rate basis. corporates which have hedged against currency and interest rate risks may escape the adverse effects. it may be noted that the reserve bank has been urging banks to encourage corporates to hedge their foreign currency exposures. further, exposure of the corporate sector as a whole to the external debt is limited by indicative ceilings on external commercial borrowings imposed by the government and the reserve bank of india. the level of total external debt of india is currently less than the foreign exchange reserves. although banks in india have their deposit base predominately in rupees and their investment in foreign currency assets is not large, they have been financing investment in assets, home loans and the retail market as well as equities. like in many emes, asset prices have risen sharply in india too. should there be a reversal of capital flows, asset prices may decline but the banks

also prepared bench mark documents covering cheque clearing – both mechanical and manual, as also retail electronic products which cover the aspects of minimum standards that have to be put in practice to ensure their efficient operations. these benchmark standards are applicable to both the processing centres run by the reserve bank as well as other commercial banks. another issue that merits attention is that of service charges. it can be argued that the competitiveness and competition or a buyer ’ s market would bring down costs in a near - tomedium timeframe and definitely in the longer run. yet, the fears of cartelisation, excessive cost - recovery in the initial years and lack of transparency in the cost - structure are concerns that need to be addressed. while the charges - framework should be remunerative to providers they should not be prohibitive to users. the challenges lie in striking a balance between cost and cost - recovery, including the issues relating to transparency in the charges framework and rationalisation of charges across banks / service providers. in uk, the office of fair trading ( oft ) has been addressing these issues. we, in india, have recently mandated the service charges that could be levied by banks for providing electronic payment products to their customers, as also for usage of shared - atm networks by banks'customers. besides other kinds of financial risks and risk mitigation measures that need to be taken, operational risk assumes significant importance in the context of retail payments and their settlement mechanisms because of the wider scope of operations of such systems which is not limited to a few players ( unlike large - value or inter - bank payment systems ). while retail payment systems need to be sized appropriately to handle substantial volumes and reduce the load on large - value payment systems, appropriate and well - tested business - continuityplans with sufficient built - in - redundancies should also be in place to ensure availability of the retail payment systems in the eventuality of any disruption / contingency. i am sure important issues such as process innovation, outsourcing, business continuity planning etc will be substantially covered during the seminar deliberations. while banks and other financial intermediaries are often the major players in any payment system arrangement, the role of non - bank operators such as technology and communication service - providers, support services for atm networks, issuance of pre - paid payment instruments, etc certainly cannot be ignored. modern payment systems, be it wholesale or retail, depend extensively on technology and communications for their effective and efficient functioning. the role of