of loss - absorbing capital relative to all of a bank's assets and off - balance sheet exposures regardless of risk weighting ; page 10 of 19 ( v ) liquidity requirements - a minimum liquidity ratio, the liquidity coverage ratio ( lcr ), intended to provide enough cash to cover funding needs over a 30 - day period of stress ; and a longer - term ratio, the net stable funding ratio ( nsfr ), intended to address maturity mismatches over the entire balance sheet ; and ( vi ) additional requirements for systemically important banks, including additional loss absorbency and strengthened arrangements for crossborder supervision and resolution. in india, basel iii capital regulation has been implemented from april 1, 2013 onwards in phases and it will be fully implemented by march 31, 2019. the latest round of reforms published by the basel committee in december 2017 have implementation timelines stretching up to 2022. having understood the background for basel regulations, let us go back to the issue of mitigating expected and unexpected losses in the credit portfolio, which, among other reasons, arise due to loans turning bad, leading to non - recovery or underrecovery of the loan. once a loan is recognised as a non performing asset ( npa ), the prudent action is to start recognising the expected losses from that loan upfront so that when the actual losses do materialise, the impact on the profit and loss statement of the bank is spread over a period of time. since expected losses can be reasonably estimated based on past experience, the provisions to cover the losses are made from the current earnings of the bank. provisions can be thought of as an expense from the income of a bank to mark a non - performing loan to its economic value in the books of banks. sometimes, the actual realisation from a npa could be higher than its marked down value, in which case banks write back the excess provision as profits in the accounting year in which the recovery takes place. provisions can, as such, be also thought of as prudential devices that smoothen the impact of bad loans on profit and loss of banks, and not as a forced expense mandated by the regulator. the basic prudent behaviour always demands that banks should never be under provided. ideally, banks should be able to test the loans in their books for expected losses and make provisions for such losses without any regulatory intervention. however, in the absence of robust models built by our banks that would

slight beating from december last year when we imposed certain restrictions on the markets to curb the volatility that we witnessed. more on it later, but it was heartening to see the turnover pick up again in recent months despite the fact that the restrictions continue to be in place. flexibility in cancellation / rebooking / roll - over for genuine transactions 14. much has been spoken / debated / argued / discussed about the flexibility to cancel and rebook transactions and also on the facility of rolling over transactions in recent times. what is required is to put in perspective the raison d ’ etre for these flexibilities. the point that i want to highlight here is that the current foreign exchange regulatory regime permits corporate to use forex derivatives for hedging their underlying exposure only. cancellation and subsequent rebooking were allowed for all transactions undertaken to hedge current account exposures and capital account exposures up to one year. this flexibility was allowed for the corporate to dynamically manage the foreign exchange risk the corporate was exposed to depending on the medium to long term view of the corporate on the currency movements and not to speculate on the intra - day volatility. however, there have been instances in the recent past wherein the flexibilities in hedging provided by the reserve bank have been misused by the corporates with speculative intent for generating profits that had exacerbated the volatility of inr - usd exchange rate in the recent period. finally, reserve bank was constrained to resort to administrative measures in december 2011 to curb such speculative practices. bis central bankers ’ speeches recent changes made to the guidelines what are the changes? 15. as stated earlier, global factors have been increasingly having an impact on the volatility of the forex markets with significant pass through of global volatility. moreover what is accorded as on add on facility during periods of stability needs to be reviewed during bouts of extreme volatility. accordingly, to ensure that such disruptions are not exacerbated by action of domestic participants reserve bank had to act by taking several measures to calm the market. why were these necessary? 16. as this gathering represents more of corporate interests rather than banks, i would restrict myself to the measures affecting corporates. • restricting cancellation and rebooking – it was observed from the various transactions undertaken by corporates with banks that the turnover of transactions increased during volatile periods and most of the increase was on account corporates undertaking a hedge and rev