anyway, for political reasons. this is often done in an unpredictable and sometimes unfair manner favouring certain segments of the population. the cost of such implicit deposit protection is often higher than that of explicit guarantees. a guarantee system makes it easier for the authorities to close problem banks. where such a system is lacking, the authorities tend to delay the unpleasant decision of closing a bank since they are afraid of the negative repercussions on depositors and other counterparties. but such supervisory forbearance only leads to growing problems and costs. it will always be difficult to close banks, but with a deposit guarantee at least the issue of the depositors is partly solved. what i just described fits in with the development in sweden. when the bank crisis came, we had no deposit guarantee system but the government found it necessary instead to issue a general guarantee, sometimes referred to as a blanket guarantee protecting all depositors but also other counterparts to swedish banks, with the exception of the shareholders. this guarantee was in fact much broader, and potentially more expensive, than a limited deposit guarantee. after the crisis, sweden has introduced legislation on a system of explicit limited deposit protection. all current deposits up to a certain amount, approximately 35 000 us dollars, are covered. for this, the banks pay a yearly premium, currently 0. 10 percent on average of the total amount of deposits. other parts of the financial sector in my presentation i have focussed on the banks, but an efficient financial sector must also contain a broad range of institutions and markets. they can specialize in certain activities and instruments and improve competition and diversity. they may also reduce the risk concentration on the banking system which implies that the overall economy will be less gravely hit if there ever is a systemic banking crisis. compare for example thailand in 1997, where the banks played a dominant role and russia in the same year where banks played a minor role. both countries were hit by financial problems but the overall effects on the economy were much worse in thailand. in sweden many different types of institutions and markets perform specialized roles alongside with the banks. there are also rapid developments in these in the form of volume growth but also in new or improved activities and instruments. the insurance sector which was as restricted in its activities as the banks during the regulation years has grown strongly in sweden after deregulation, both for non - life and life insurance products. the demography of sweden is such that we have an ageing population. thus savings for retirement, for instance

the credit information bureau. the group is also considering the suggestion given by bankers that information regarding the defaults of state governments be collected and widely circulated and published. yet another area critical for financial stability relates to several international initiatives were undertaken over the last couple of years with the goal of maintaining financial stability by strengthening the financial infrastructure. the rbi and sebi were members of one such task force on securities settlement systems constituted by bank for international settlements. the report has since been finalised and released by bis. an expert group is being set up by the rbi to examine the adherence to the recommendations in regard to government securities market in important areas such as legal risk, pre - settlement risk and settlement risk. efficient payment system is also very critical to meet the new challenges. the rbi has been engaged in the design and development of the payment system in india as part of the financial sector reforms. the broad objective of this process is to ensure the setting up of a robust, efficient, secure and integrated payment and settlement system for the country. the ultimate aim to be achieved in this regard is to ensure quick settlement of financial transactions, especially in an electronic environment based on a sound legal foundation. the rbi is addressing the task of drafting the indian payment system legislation considering among others issues, finality of payment / settlement in an electronic environment, issues of failure from bankruptcy and the formulation of the framework for the payment system act, the netting act and other related issues. to bestow focused attention, a payments systems department is being contemplated within the rbi by appropriate restructuring and retraining of the existing officers and staff. the functions of this department will include among other things, formulation of payment system policies, regulation of payment system, implementation of core principles of the bis relating to payment system, etc. finally, with regard to the financial sector, banks have always been concerned at the regulatory burden on them due to the crr requirement. rbi desires to move to a 3 per cent crr regime, but at the current stage, early movement can be considered only if it is a package and one of them relates to the present way of maintenance of cash balances by banks with the rbi. apart from this, as mentioned in an address yesterday, the time has come to take a hard look at the access of banks to call money. the call money window should be used to iron out temporary mismatches in liquidity and not on a sustained basis as a source of funding their normal requirements. an option to be discussed is