importantly, globalisation - led productivity gains contributed to a trend decline of inflation across countries. more and more countries, including emerging market economies ( emes ), strengthened their monetary policy frameworks with a number of them adopting inflation targeting. there was growing talk of globalisation leading to sustained disinflationary forces, technology diffusion and competition. we witnessed low and stable inflation in advanced economies ( aes ) and several emes beginning the 1990s and through the second decade of the new millennium. 5. with greater trade and financial integration, the domestic economies get more exposed to global shocks including volatile short - term capital flows. for instance, global shocks to food, energy and commodity prices affect inflation in every country. during the covid - 19 pandemic and now due to the war in europe, there are clear signs of transmission of global shocks to generalised and synchronised inflation across the world. 6. the recent upsurge in inflation due to the black swan event, i. e., the war in europe, on top of another such event, i. e., the covid - 19 pandemic offers a classic example of the globalised nature of current inflation. around 77 per cent of countries reported acceleration in inflation in 2021 and this proportion is expected to rise further to 90 per cent in 2022, according to the imf ’ s latest projections. moreover, for advanced economies, against an inflation target of 2 per cent, and emerging market economies, against an average target of about 3 - 5 per cent, two - thirds are witnessing inflation above 7 per cent 1. while global factors have always been an important driver of domestic inflation, what we have witnessed over the past three years is the more protracted and sizeable role of global factors in proportions not witnessed in decades. these factors have an even more conspicuous effect on net commodity importing countries like india. 7. with the origins of this inflation being essentially in the supply side, energy and food prices account for more than 50 per cent of the rise in prices. there are also increasing signs of sectoral price spillovers, given that the rise in global energy and commodity prices quickly translate into higher input price pressures. while in some advanced economies, pricing power of firms has increased significantly due to strong domestic demand since 2021, other advanced economies and emerging market economies have just started experiencing such pressures beginning 2022. household inflation expectations have started firming up, though they are based on current inflation data from

case of noncompliance with the prescribed disclosure requirements. conclusion so far, we have covered the various issues in the implementation of the simplified approaches of basel ii. the implementation of advanced approaches, such as irb approach for credit risk and advanced measurement approach for operational risk, require much more preparation and pose several challenges for both the banks as well as the supervisors. the banks would require to meet the minimum requirements relating to internal ratings at the outset and on an ongoing basis, such as those relating to the design of the rating system, operations, controls, corporate governance and estimation and validation of credit risk components : probability of default ( pd ) for both foundation and advanced irb, and loss given default ( lgd ) and exposure at default ( ead ) for advanced irb. the banks should have at a minimum pd data for five years and lgd and ead data for seven years. the manpower skills, the it infrastructure and mis at the banks would have to be upgraded substantially. the supervisors would require developing skills in validation and back testing of models. with the focus on regulation and risk management in the basel ii framework gaining prominence, the post basel ii era will belong to the banks who manage their risks effectively. the banks with proper risk management systems would not only gain competitive advantage by way of lower regulatory capital charge but also add value to the shareholders and other stakeholders by properly pricing their services, adequate provisioning and maintaining a robust financial health. as we stand at this juncture, i trust innovative and illuminating ideas, fresh insights and alternative ways of thinking about the competitive yet cooperative combat that the world of banking and finance is readying itself for will mark the south indian bank ’ s business strategies and institutional development plans and will give you the emotive content to carry forward the legacy and vision of your founding fathers and take your institution to new heights. with these words i wish you every success in all your future endeavours. thank you.