, sound debt markets dominated by public issues are in place, banks could proceed with such financing, especially at the shorter end. it is very satisfying to see some serious effort to improve financing of priority sector - a less fashionable, but more legitimate area for banks. governance aspects covered in the third section are somewhat tricky to be handled for several reasons, but some of the distinguished speakers seem to have made telling points such as the need for arms - length to be maintained by owners with the board, and the fact that best corporate governance exists when ownership is widely distributed. i wonder government is treated as a single owner for this purpose!. there appears to be some broad consensus on reform in this area. first, effective corporate governance arises out of responsible and vigilant simultaneous actions by the managers, the board of directors and the shareholders of a company. second, the essence of corporate governance relates to a system in which the interests of the whole gamut of stakeholders of an organisation are recognised and conflicts among them are sought to be reconciled. third, indian banks will have to enhance the transparency of their operations and make greater disclosures to the public to attain international standards of corporate governance. fourth, one may expect to see governance rating of institutions along the lines of credit rating. some issues relating to cooperative banks, especially urban cooperative banks have been discussed, particularly on regulatory matters relating to access to capital funds from the capital market, lending rate stipulations, evolution of a credit rating system, giving a level - playing field with commercial banks, etc. a significant point raised though perhaps not debated extensively relates to the conflicts of interests among various stake holders. it is heartening to note that a paradigm shift in banking recognises the need for resolving the complexities of cooperative banks, especially urban cooperative banks, regional rural banks and perhaps local area banks. critical to appreciating these issues is perhaps the appropriate framework of corporate governance for institutions, which are under the cooperative fold at their current stage of legal and regulatory framework. it is also interesting to note that public sector banks have made legitimate points about the level - playing field and the need to consider public sector banks fully owned by the government and others where there is shareholding by public. the external constraints imposed on them, the restrictions on internal consolidation due to work practices need to be addressed in any debate on paradigm shift, while the distinction between fully - owned and others is critical to issues relating to corporate governance. the broader issue of the case for or against

policy of april 2001 had expressed the rbi ’ s intentions to divest its holdings in state bank of india, nabard and national housing bank through transfer to government. the rbi has also sent proposals to the government to transfer its loan portfolio in respect of idbi, idfc, etc. i understand that you have had lively discussions on international standards and codes. as you are aware, a standing committee on international standards and codes was set up to benchmark indian practices against international standards. the standing committee had set up ten advisory groups in key areas of the financial sector. the groups have completed their reports, which are available on the rbi website. i would like to draw your attention to two reports which have a direct bearing on the banking system – advisory group on banking supervision ( chairman : shri. m. s. verma ) and advisory group on corporate governance ( chairman : dr. r. h. patil ). the group on corporate governance emphasized the strengthening the rights of shareholders in banks and financial institutions, appointment of risk management committees, withdrawal of special status of government directors, withdrawal of rbi directors and improvement in regard to disclosure of information. the group on banking supervision recommended on issues such as independence of supervisor, capital adequacy, management of credit risk, connected lending, functioning of board of directors etc. currently, the standing committee is in the process of consolidating the reports of the ten advisory groups and identifying the legal, procedural and policy changes required in implementing the recommendations. a number of recommendations would need amendments to the banking regulation act, companies act, rbi act, etc. following the finance minister ’ s budget speech last year, the rbi had already indicated a number of legal changes that would be required to give more flexibility to monetary policy. in the financial markets, the government securities bill is at the final stages of consideration. a working group in the rbi has already proposed a draft bill on securitisation, to government. an important issue in regard to banks ’ operational area relates to the sharing of credit information. currently, banks are sharing information on an informal basis. however, the rbi has been collecting and disseminating information on the list of suit filed defaulters, including wilful defaulters. formalising the system of sharing information would require amendment to secrecy laws. in order to overcome this aspect in the short run, pending legislative amendment, the rbi has constituted a working group to operationalise the process of collection and dissemination of data on credit information by