impact on banks ’ balance sheets as well as the national economies. 5. quite understandably, there has been a lot of international media attention on the implications of the basel iii proposals and their pros and cons. we have had some of that in india too focusing on what the proposed reforms might mean for us. i thought the most efficient way to use this ficci - iba platform that you have so kindly provided me is to highlight the broad contours of the basel iii proposals and their potential implications for indian banks. the theme of this conference, “ banking 2020 – making the decade ’ s promise come true ” is very appropriate as the banking sector needs to evaluate how best it can contribute to the double digit growth and rapid poverty reduction that we are aspiring to. hopefully, the assessment of the basel iii package that i will give will contribute to a more informed evaluation of the role that banks should play in our growth process. 6. let me start by taking each of the major components of the basel iii package. on each, i will explain what the proposal implies in general and then look at it from an indian perspective. i. capital adequacy framework – bcbs proposals improving quality, consistency and transparency of capital 7. the proposals regarding the capital adequacy framework aim at ensuring that the quality of capital is high, there is consistency in the definition of capital across various jurisdictions and that there are appropriate disclosures to make the capital base transparent. the focus is on making common equity the predominant form of bank capital and to enhance the loss absorbing capacity of the other elements of regulatory capital. the key changes include prescription of an explicit minimum tier i requirement ; deduction above a certain threshold, from common equity, of significant investments in the common shares of unconsolidated financial institutions and deferred tax assets arising from timing differences etc. ; limiting the recognition of minority interest in group capital to the extent of its share in the minimum capital required for subsidiary banks ; and appropriate disclosure of various elements of capital. improving risk coverage of the basel ii framework 8. the crisis has exposed several flaws in the quantitative risk management models used by banks. one of the flaws is the inability of the models to capture the market risk in their trading book positions, particularly under stressed conditions. this is sought to be corrected by requiring that the capital calculations be made on parameters calibrated to stressed conditions. 9. the last decade witnessed a quantum jump in the derivatives activities of banks leading

banks under their fi initiatives. in this direction we have put in place a structured and comprehensive monitoring mechanism for evaluating banks ’ performance vis - a - vis their targets. to ensure support of the top management of the bank to the fi process and to ensure accountability of the senior functionaries of the bank, one on one annual review meetings, chaired by the deputy governor, are held with cmds / ceos of banks. a snapshot of the progress made by banks under the 3 year financial inclusion plan ( april 10 – march 13 ) for key parameters during the three year period indicates that banking outlets increased to nearly 2, 68, 000 banking as on march 13 as against 67, 694 banking outlets in villages in march 2010. 7400 rural branches have been opened during this period of 3 years. nearly 109 million basic savings bank deposit accounts ( bsbdas have been added taking the total no of bsbda to 182 million. share of ict based accounts have increased substantially – percentage of ict accounts to total bsbdas has increased from 25 % in march 10 to 45 % in march 13. about 4904 lakh transactions have been carried out in ict based accounts through bcs during the three year period. after completion of the first plan period, we realized that there is a access usage conundrum a large banking network has been created along with the opening of large number of bank accounts. however, we have realized that simply creating the banking infrastructure and opening banking accounts will not fulfill our objectives of achieving total financial inclusion. to take the process, forward banks have been advised to draw up fresh 3 year financial inclusion plans for the period 2013 – 16. ensure involvement of all the stake holders in the fi efforts and to ensure uniformity in the reporting structure under the financial inclusion plan, banks have are to ensure that the fips prepared by them are disaggregated and percolated down upto the branch level. the focus under the new plan is to ensure that the large banking network created is utilized for extending other products viz. credit products, which will help make the business more viable for banks. this would also ensure that the large number of accounts opened see an equally large volume of transactions taking place and people reap the benefits of getting linked to the formal financial institutions. xi. robust institutional mechanism – over the years one of our major achievements and strength has been the creation of a robust institutional mechanism which would support the roll out of banking services across the country. the financial stability