##mediaries to deal in various segments of the financial market spectrum is improving almost continuously. periodic monitoring and self - assessment of the quality of financial supervision is buttressed by external audits, including by the imf. in the years ahead, we will continue to vigorously pursue the objective of financial stability by developing and refining our approach, modulating the pace and sequencing of regulatory function with the financial dynamics and benchmarking ourselves against international best practices so that our financial institutions emerge as global players and india becomes the international financial centre of the new millennium.

steps from time to time to enhance the transparency in banks ’ operations by prescribing comprehensive requirements for disclosure in tune with the international best practices. in view of the added emphasis on the role of market discipline under basel ii and with a view to enhancing further transparency, banks have been advised on october 19, 2004 that all cases of penalty imposed by the reserve bank as also strictures / directions on specific matters including those arising out of inspection will be placed in the public domain with effect from november 1, 2004. conclusion to conclude, ensuring an acceptable degree of financial stability is a never - ending process. looking ahead, the vulnerability to real sector shocks has the potential to significantly affect financial stability in india. the major sources of shocks in india are very sharp increases in oil prices and extraordinary monsoon failures and other natural calamities with consequent impact on the agricultural sector, spilling over to other sectors of the economy. therefore, the weight to financial stability in india is higher than in many other countries. financial stability has moved to centre - stage nationally as well as in discussions relating to the future of the global monetary and financial system. several factors have brought this about : the disturbing intensity and frequency of financial crises in the decade gone, the move to strengthen domestic financial systems under basel ii and the unfinished quest for the appropriate international financial architecture for crisis prevention and management. unlike in some countries where the responsibility for financial stability has been located in an independent authority, our approach has been to exploit the synergies that exist between the conduct of monetary policy and the function of financial regulation. accordingly, financial stability in india is an integral responsibility of the reserve bank. appropriate governance has enabled us to mitigate areas of conflict of interest even as we have reaped the benefits of ( i ) a deep understanding of the dynamics of india ’ s financial sector – which, in essence, has evolved around the reserve bank over the years – ( ii ) oversight of money, debt and foreign exchange markets and ( iii ) the accumulation of the technical skills associated with regulation and supervision. the experience with the tumultuous 1990s has shown that our approach has stood the test of time in ensuring a stable, vibrant and well - functioning financial system in the country. we have a well - capitalised financial system even by international standards, with low levels of loan delinquency despite our prudential standards being set tighter than international standards. our financial markets are orderly and smoothly functioning and the ability of our financial inter