initiatives envisaged under the fiscal responsibility and budget management ( frbm ) act, public savings are expected to improve further. besides, households in india are the major contributors to savings and given the favourable indian demographics over the next 20 years, the savings rate in india is expected to remain high. this is in sharp contrast to other east asian countries as well as in the us, where major contributor to savings are the corporates that largely depend on the cyclical path of the economy. iv. possible impact of global imbalances on india fiscal india continues to have a high fiscal deficit by international standards though it has declined significantly in recent years. in order to achieve sustainable fiscal correction and consolidation, both the central and state governments have adopted fiscal responsibility legislations i. e., fiscal responsibility and budget management ( frbm ) acts. the combined fiscal deficit of the centre and states is budgeted to come down to about 6. 5 per cent by 2007 ( table 4 ). even if it is assumed that the centre and the states comply with their respective frbms, their combined fiscal deficit would continue to remain above 6 per cent by 2009 - 10. generally, one would presume that india remains somewhat vulnerable to the impact of global imbalances on this account. however, the indian case is unique as the government does not resort to external financing to finance domestic debt. this would help india in not being subject to the consequences of global imbalances. in addition, both reserve bank of india and government of india have undertaken various initiatives to develop the government securities market. the earlier features of an administered market with automatic monetisation have been done away with. the indian g - sec market today is more broad based, characterised by an efficient auction process, an active secondary market supported by an active primary dealer system and electronic trading and settlement technology ( mohan, 2006 ). the effect of global imbalances, however, could be indirect through a rise in domestic interest rates as a consequence of rise in international rates. there could be an increase in the cost of borrowings of the government. however, since most of the outstanding debt is at fixed rates and not on floating rates, the rise in the borrowing cost will be incremental. this situation also provides greater headroom for a flexible monetary policy to adjust policy rates, as and when warranted, without any excessive impact on the fiscal deficit ( reddy, 2005 ). private corporate sector private corporate external borrowing has been liberalised substantially in

be subject to less frequent but regular assessments. good quality internal audit reports can provide valuable insights mitigating current risks and anticipating areas of potential risks by evaluating the risk management systems and control procedures prevailing in various areas of a bank's operations. it can also play an important role in preventing and detecting frauds. role of rbi onsite examinations by rbi are not intended to be fault finding missions and instead to provide an insight into the overall health of the bank. they often pick up issues missed by the internal assurance functions and external audit. we would also like you to give due attention to the risk assessment report ( rar ) observations and risk mitigation plans ( rmp ) issued by the rbi. to ensure sustained compliance, it is important to address the root cause of the observations. further, there should be no compromise on the agreed timelines for rmps, and the bank should ensure that all rmp items and rar observations are comprehensively addressed well before the start of the next 3 / 4 bis - central bankers'speeches inspection cycle. pending compliance paragraphs is not a desirable situation and may be a reflection of the lack of due attention by the management as well as the board. such instances can also invite stern supervisory action. conclusion one of the most important facets of effective assurance functions is independence. there are regulations already in place that provide for adequate stature, direct lines of reporting and preventing of dual hatting of assurance functionaries. i would urge you to ensure that these regulations are complied with and that you are not engaged in any role which compromises your independence. overall, i believe assurance functions, if they work effectively, can create an environment in the bank where adherence to laws, regulations, ethical standards, and internal policies is paramount, and where everyone is committed to doing the right thing. effective assurance functions are indispensable in promoting trust, integrity, and compliance within the banking sector. by working collaboratively and proactively, we can navigate the challenges ahead and ensure the long - term success of our institutions. i once again extend my sincere regards to all present and wish that going ahead in future we collectively embark on a journey of financial resilience drawing from the key ideas discussed here. i also look forward to listening from you. 4 / 4 bis - central bankers'speeches