leverage ratio that is now being implemented globally as a backstop to the risk measure as part of the overall basel iii package, is more or less a given for the indian banks. we have also been calibrating risk weights on sensitive sector exposures like commercial real estate as a macro prudential tool to help arrest building of asset price bubbles, much ahead of the prescriptions on countercyclical and capital conservation buffers which have since appeared as part of the basel iii reform pack. 7. in regulation - making we have followed a gradualist approach and have generally been wary of complex and opaque instruments / products. for the same reason, we insisted on the lenders having a ‘ skin in the game ’ in securitisation transactions, which curtailed reckless origination of loans without proper appraisal with the sole purpose of distributing the same to investors at a later date. we all know now that inadequacy of the market infrastructure to deal with the opacity and complexity of derivative products was the single - most important reason for the financial crisis. we, in india, have exercised extreme caution on the financial derivatives, baulked at opaque structures with complex pay - offs and have insisted on banks ’ ascertaining the suitability and appropriateness of the customers before selling any complex derivative instruments. rbi ’ s approach to development of the forex and interest rate derivative market has been one of cautious gradualism. regulators have also been conscious about the risks emanating from the activities of asset managers, something which is viewed as a significant vulnerability in the global context today. in this regard, there are restrictions around extent of lending and leverage the asset managers in india can undertake and also limits on their use of derivative products. 8. while we have been cautious on introduction of complex products / instruments, we have not been found wanting on efforts towards deepening and widening of financial markets. india is amongst the first few countries in the world to have a screen based electronic anonymous order matching system for secondary market trading in government securities. similarly, indian equity markets are amongst the best in the world in terms of use of technology, institutional mechanism, and products. in order to promote transparency, price discovery, cost effectiveness, better risk management and a market for hedging of risks, exchange traded currency futures and interest rate futures have been allowed to trade in india. few other developmental measures initiated by rbi are : • permitting banks to provide partial credit enhancements to bonds issued by

##r and banks would need to leverage it to their advantage. the impact of disruptive technology is already evident in the form of competition from non - banks such as e - commerce companies, p2p lenders, crowd funding, which is likely to only intensify going forward. 15. let me conclude by saying that the indian banking system would continue to remain the prime mover for the indian economy in the foreseeable future. it is, therefore, important for us to ensure that the system remains healthy and vibrant. as regulators and supervisors, we would also need to be vigilant about the emerging risks that the banks could face and proactively suggest measures to enable banks to mitigate them. on the institutional side, enactment of a bankruptcy code to deal with firms in distress and setting up of a resolution authority for liquidation of failed financial institutions would be key enablers. similarly, capacity building would be important for both the banks as well as the regulators. hence, the banks would do well to : ( i ) deal with, rather than postponing the asset quality challenges, so as not to miss on the emerging opportunities. ( ii ) be opportunistic in raising capital ( iii ) be prepared to live with a more intrusive and globalized regulatory framework i conclude by once again thanking the mint team for inviting me to this conference and i look forward to an interesting panel discussion. thank you! bis central bankers ’ speeches