prices. this may amplify price declines and liquidity shortages. effective liquidity management and regulation are very important here. a recently published bundesbank paper shows that price - based liquidity management tools help keep the financial fragility of open - ended mutual funds in check. 2 in times of stress, investors also try to protect their capital by shifting it into safer assets. however, this flight to safety can intensify the downward pressure on the prices of riskier assets as demand for the latter declines. the financial stability board is doing important work in this field. but it is currently focused on microprudential regulation. i think the fsb's work on this front needs to be complemented by the development of macroprudential regulation for the nbfi sector. in any case, we should not jeopardise what we have achieved in the banking regulation space by allowing stability risks to build up elsewhere in the financial system. 3 central bank digital currencies the second session is on central bank digital currencies ( cbdc ). cbdc is an issue that is keeping almost all central banks very busy at the moment. the eurosystem is hard at work preparing for the potential introduction of a digital euro. as the world turns increasingly digital, the digital euro would provide a secure and efficient digital payment option that complements cash. it aims to strengthen europe's strategic autonomy by building on european infrastructures, and to promote innovation in the private sector. however, introducing a cbdc could also have unintended side effects. if bank customers were allowed to hold it in large amounts, periods of banking distress could trigger large, sudden shifts out of deposits into cbdc. this could lead to financial instability. and if cbdc were too attractive a substitute for deposits, commercial banks'access to retail deposits could erode over time. which could lead to structural disintermediation and call into question our proven two - tier banking system. it is therefore of the essence to design cbdc in a way that prevents these risks from materialising. the challenge is to optimise the usability of cbdc as a means of payment while at the same time limiting its effects on the market for bank deposits. two decisive factors in this regard are remuneration and holding limits. let me say a few words on each of these. 2 / 5 bis - central bankers'speeches remuneration means the rate of interest on people's holdings

dccb [ ( - ) ₹ 10. 43 crore ] were having negative networth as on march 31, 2014. we have advised nabard to take up the matter with the state government / rcs to take suitable measures for recapitalisation of the banks so as to ensure that the banks achieve a minimum crar of at least 7 % by march 31, 2015. we have also taken up with the chief secretary, karnataka state government and rcs of the state to initiate steps for recapitalization of these banks. bis central bankers ’ speeches iii. way forward 24. considering the inherent challenges in the sector, it is required to put in place measures for the long term health of the sector. earlier, rbi was not able to take coordinated action as it could have destabilized the sector. the sector has shown considerable improvement today and time, is perhaps, ripe to strengthen the framework to a level of regulatory comfort. it is possible of getting co - operative banks to move towards regulatory capital requirements over a period of time by nudging capital compliance towards industry standards based on a practical timeline. further, in the context of changing landscape, a view needs to be taken whether a fresh round of co - operative bank licensing is due and put in place a definite migration path for fswm co - operatives to make the transition to sfbs / commercial banks and at the same time continue efforts relating to governance reforms. 25. it is pertinent to examine the merit and possibility of amending cooperative acts in states to the effect the provisions requiring every borrower having a voting share do not weaken the ucbs ; you all will recall that such provisions have led to an anomalous situation where borrowers, who create the risk, control the bank and the depositors who bear the risk don ’ t. 26. the possibility of acquiring shares by members at the book value at the time of entry and divest the shares at the book value at time of exit also needs to be examined, the purpose of the exercise would be to create appropriate incentives so that members get the benefit or otherwise of the reserves that are built during their membership. iv. conclusion 27. cooperative banks are unique in terms of their structure, clientele and credit delivery. the resilience and stability shown by these banks during the recent global financial crisis has underscored their importance in the financial system of both developed and emerging market economies. despite their inherent weaknesses in terms of low capital, poor management