enforcement of security interest ( sarfaesi ) act, 2002 has helped in improving the recovery climate in the country. the government amended the relevant provisions of the act to address the concerns expressed by the supreme court regarding a fair deal to borrowers through an ordinance dated november 11, 2004. the declining trend in gross and net npls for scheduled commercial banks has continued despite the adoption of 90 - day delinquency norm and unprecedented surge in growth of advances. legislation has since been enacted to facilitate the compilation and dissemination of credit information including data on defaults to the financial system by the credit information bureau of india ltd. ( cibil ). the legal provisions and practice in bankruptcy of the real sector are however still inadequate and need further reform. the reserve bank is also making efforts to formulate policies to deal with risks arising on account of operations of large and complex financial institutions as these pose a systemic risk. as a first step in this direction, an inter - agency working group on financial conglomerates ( fc ) comprising three supervisory bodies, viz., the reserve bank, the securities and exchange board of india and insurance regulatory and development authority, in june 2004, identified 23 fcs and a pilot process for obtaining information from these conglomerates has been initiated. the year 2004 - 05 has witnessed a surge in credit off - take leading to a sizeable decline in the liquid assets of the bank. consistent with the shift to functioning in a competitive economy and to the adoption of prudential best practices, the major challenges facing the banking sector are the deployment of funds in quality assets and the management of revenues and costs. basel ii unlike basel i, which is simple, basel ii is complex. therefore, the bcbs does not expect basel ii to be adopted widely or quickly. they believe that countries should adopt the options and approaches that are most appropriate for the state of their markets, their banking 2 / 7 systems, and their supervisory structures. supervisors can adopt the framework on an evolutionary basis and use elements of national discretion to adapt it to their needs. why move to basel ii under basel ii the capital requirements are more risk sensitive as these are directly related to the credit rating of each counter - party instead of counter - party category as it is under basel i. further, it requires banks to hold capital not only for credit and market risk but also for operational risk ( or ) and where warranted for interest rate risks, credit concentration risks, liquidity risks etc. this makes basel ii more

resilience is maintained. resisting fragmentation there are, however, other nascent risks that, if left unchecked, could threaten the progress made, and, ultimately undermine the g20 ’ s objective for strong, sustainable and balanced growth. these risks include the impact of reform fatigue on implementation momentum, the outcome of brexit negotiations, the need to complete basel iii, and the importance of finishing the job of ending too big to fail. in many respects, the global financial system is at a fork in the road. on one path, trust and cooperation diminishes, fragmentation hardens, capital flows are disrupted, and trade and innovation are curtailed. if authorities do not have sufficient confidence that their efforts to promote financial stability are being reciprocated elsewhere, then concerns about the risks of openness could intensify. if that happens, domestic authorities could impose local requirements on domestic entities of foreign firms. in a world where many banks and fmis are highly interconnected that would generate significant inefficiencies, frustrating the benefits that flow from open trade and investment. taking this low road would be sub - optimal for all, with fewer jobs, lower growth and higher domestic risks. one example is a report by the committee on the global financial system on the resilience of global repo markets that is being delivered to the g20 this week. all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx but there is another path : the high road. this builds on the foundations of a new responsible global financial system that are being put in place. the combination of robust international standards and greater trust as a consequence of transparent implementation and intensive supervisory cooperation can create a system of enhanced equivalence and mutual deference. such an approach would allow capital to move more freely, efficiently and sustainably between jurisdictions. with robust standards consistently applied, wholesale financial services could be brought more fully into trade agreements, keeping the global financial system open and resilient, and supporting greater trade, investment and innovation. this high road leads to more jobs, higher sustainable growth, and better risk management across the g20. working together to take full advantage the high road can be followed if my third priority – taking full advantage of the progress made – is pursued. in this regard, it is important not just to recognise progress made but how it has been made. the fsb has succeeded by emphasising collaboration