of achieving efficient distribution of resources in conformity with the requirements of the economy and in order to meet the needs of the priority sectors, the government decided to introduce social control over banks by amending the banking laws. accordingly, on july 19, 1969 and april 15, 1980 respectively, 14 and six major indian scheduled commercial banks in the private sector were nationalised. social control marked a transitory stage in the evolution of banking policy and in this process ; a system of credit planning and the lead bank scheme were operationalized by the reserve bank to make the banking system function as an instrument of economic and social development. 15. in conformity with these desired objectives of social control, the banking policy was reoriented in the seventies for securing a progressive reduction in poverty, concentration of economic power and regional disparities in the banking facilities. the promotional aspects of the banking policy came into greater prominence. in this direction, the branch expansion policy was designed, among other things, as a tool for reducing inter - regional disparities in banking development, deployment of credit and urban - rural pattern of credit distribution. administered interest rate policy emerged as an important instrument for directing the flow of funds and for augmenting the pace of deposit mobilisation. the reserve bank opted for selective extension of credit under the selective credit control scheme to those sectors that were accorded priority in conformity with the national objectives. the objective was to correct undue price fluctuations in respect of certain commodities such as food grains and agricultural raw materials arising from speculative activities. the main instruments of selective credit control were a ) minimum margins for lending and b ) ceilings on the level of credit against stocks of selected commodities to control the quantum of credit given. 16. the period since 1985 was a process of consolidation which involved, i ) comprehensive action plans by banks covering organization, structure, training, house - keeping, customer service, credit management and recovery of bank dues, productivity and profitability, ii ) phased introduction of modern technology in banking operations with emphasis on financial viability by easing some of the policy related constraints on profitability, iii ) strengthening capital base of banks and iv ) allowing them flexibility in several areas. 17. by the end of eighties, the indian economy had developed an extensive financial superstructure consisting of a vast network of institutions, deploying varied instruments and facilitating the mobilisation and channelling of funds for working capital and production credit purposes as well and for long term investment. the reserve bank thus helped promote and

to the global scene. emes are expected to be fast - growing economies ; the need for, as also the level of savings, investments, both domestic and foreign, consumptions and rate of growth are all expected to be higher and much faster due to the smaller base effect. 6. accordingly, the emes have their specific economic and developmental needs and agenda. the global banking regulatory standards, or for that matter, the regulatory framework for any other financial sector segment is designed more to suit the needs and the level of development in the advanced economies. the fundamental reason for this is their dominant presence and role in the global standard setting fora as also the more advanced stages of their financial sector development including the higher level of complexity, variety and sophistication of financial products and services innovated / offered in these economies. however, the existing financial intermediaries and the available financial products and services in the emes often fall grossly short of meeting the requirements of higher and faster growth, savings, investments etc. moreover, the requirements of funding infrastructure and social sectors, as also the real sector, are unprecedented, particularly in view of the serious constraints on funding, muted investor and international confidence, under developed condition of the social and public institutions, lower levels of appropriate skills, specialisation and expertise, etc. the risks and volatility emerging from the foregoing are equally large and often alien to the eme milieu. that is why the regulatory standards, often designed keeping in view the ground realities in the advanced economies, may not also always be a perfect fit for the emerging economies and the emes use national discretion in this respect while at the same time making sincere attempts at aligning their regulatory framework with the global best practices. evolution of banking regulation in india 7. reserve bank of india was established on april 1, 1935 in accordance with the provisions of the rbi act, 1934 ( the act ). this marked the culmination of the prolonged efforts, to set up a central bank in the country. the principle of aligning the regulatory structure to the specific needs of the country and for that matter to even go beyond the prevalent wisdom and ethos were distinctly visible at that time itself. despite the reserve bank being constituted as a central bank, it was thought fit to prescribe in the statute itself a development role for the reserve bank. accordingly, the act has a provision that the reserve bank will develop and maintain expertise in agricultural development ( later expanded as rural development ) and