##cient management, strained labour relations, inappropriate technology / technical problems, and product obsolescence, etc. 6. the current deterioration in the asset quality of indian banks could mainly be attributed to domestic and global economic slowdown, delays in statutory and other approvals, especially for projects under implementation, relatively aggressive lending practices during upturn ( 2003 – 08 ), as evidenced from high corporate leverage, risk concentration, especially to large greenfield projects, and of course, lax risk management systems of banks, etc. npa management 7. managing npas has a lot to do with managing productive assets and ensuring effective corporate governance. management of npas begins with the realisation of benefits that accrue in running a quality advances portfolio and warrants a better understanding of risks in lending. the board of directors has to decide a strategy on npa management keeping in view the regulatory norms, the business environment, the asset profile, the available resources, etc. the strategy should be reflected in board approved policies and procedures to monitor implementation. 8. the essential components of sound npa management are : ( i ) prevention of npas through prudent underwriting ( ii ) effective early alert system ( iii ) quick and effective remedial measures to prevent slippage ( iv ) faster resolution of post slippage 9. a multi - pronged strategy of preventing slippage of standard assets into npa category and reducing npas through cash recovery, up gradation, compromise, legal means etc., is called for. restructuring 10. generally, stress in borrowal accounts is more likely to be resolved in terms of recovery if the company is in operation. for this to be effective there must be a system of identifying the weakness in accounts at an early stage. banks should put in place an ‘ early alert ’ system that captures early warning signals in respect of accounts showing first signs of bis central bankers ’ speeches weakness. this would help the banks to take remedial measures and prevent the account from becoming npa. banks may restructure / reschedule the accounts of viable entities and assist the entity to tide over the temporary difficulties faced by them. 11. once a weak account is identified, the bank needs to consider various corrective actions. one of the corrective options is restructuring. in spite of their best efforts and intentions, sometimes borrowers find themselves in financial difficulty because of factors beyond their control and also due to certain internal reasons. for the revival of the viable entities as well as

world. 49. the jury is still out, but a consensus is building around the view that central banks now need to balance price stability, financial stability and sovereign debt sustainability. how this is to be achieved is the big question. 50. clearly there are no easy answers. but there are certain tenets that must inform the thinking over this issue. first, the fundamental responsibility of central banks for price stability should not be compromised. second, central banks should have a lead, but not exclusive, responsibility for financial stability. third, the boundaries of central bank responsibility for sovereign debt sustainability should be clearly defined. fourth, in the matter of ensuring financial stability, the government must normally leave the responsibility to the regulators, assuming an activist role only in times of crisis. bis central bankers ’ speeches 51. the crisis has made a strong case for a more expanded role for central banks. do we ignore all that, and fall back on the old understanding of what a central bank should or should not do to change the rbi ’ s remit and scope of influence? that could turn out to be sub - optimal, even risky. 52. related to all this is the question about the limits to the autonomy of the reserve bank and where and to what extent it should defer to the executive. finally, there are also questions about the accountability of the reserve bank for the outcomes of its policies. 53. as governor of the reserve bank, i not only welcomed the debate on these issues, but even encouraged it, in the firm belief that such a debate is in the larger public interest. at various times and in various contexts, i have responded to the issues in the debate. this is not the time and platform for extensive engagement on these issues. here, i only want to give my broad view. 54. admittedly, the reserve bank has a mandate that is wider than that of most central banks. this is an arrangement that has served the economy well. there are synergies in the various components of the reserve bank ’ s mandate and we should not forefeit those synergies. surely, our institutional structures must adapt to the changing socioeconomic context, but any such change must be brought about only after extensive debate and discussion. 55. notably, in a full length feature on the reserve bank in 2012, the economist had said that the rbi is a role model for the kind of full service central bank that is back in fashion worldwide. there is something to that. 56. it is also