indian bond markets. we are receiving encouraging response from countries to participate in rupee - based trading. the asian clearing union is also exploring a scheme of using domestic currencies for settlement. an arrangement, bilateral or among trading blocs, which offers importers of each country the choice to pay in domestic currency is likely to be favoured by all countries, and therefore, is worth exploring. 16. as increased use of rupee in cross - border transactions requires a unified global market in rupee both in interest rates and currencies. such unification would not only improve depth and liquidity of our markets, but they would also facilitate uniform pricing across borders. accordingly, reserve bank has also been putting in place enabling conditions by way of linking the domestic rupee interest rates and currency markets with offshore rupee markets by enabling domestic banks to operate in the offshore markets. concomitantly, primary dealers ( pds ) have been allowed market making in forex markets to improve market liquidity. further steps in this direction are enhancing transparency of global rupee markets through a comprehensive reporting framework. a desirable outcome would be if market - makers like banks and pds centralize their global rupee book in india. among other benefits, this would improve risk management for indian and global firms alike and enhance the global role for india ’ s financial sector. 17. we have so far discussed the advantages. let us know consider the risks. i. india is a capital deficient country, and hence needs foreign capital to fund its growth. if a substantial portion of its trade is in rupee, non - residents would hold rupee balances in india which would be used to acquire indian assets. large holdings of such financial assets could heighten vulnerability to external shocks, managing which would necessitate more effective policy tools. ii. a reduced role for convertible currencies in external transactions could lead to reduced reserve accretion. at the same time, however, the need for reserves would also reduce to the extent the trade deficit is funded in rupees. iii. non - resident holdings of rupees could exacerbate pass - through of external stimulus to domestic financial markets, increasing volatility. for instance, a global risk - off phase could lead nonresidents to convert their rupee holdings and move out of india. 18. these risks are real, but they are unavoidable if india is to progress to be an economic superpower. macroeconomic policy would

the global financial system, we work with other central banks to monitor developments in global financial markets, reporting to the central bank governors of the g - 10 countries. - in the basel committee on banking supervision ( basel committee ), we and the other u. s. bank supervisors work with other central banks and bank supervisory agencies to promote sound banking supervision by developing standards for bank capital requirements and bank risk management, and by promulgating principles for effective bank supervision. the basel committee, which doubled its membership earlier this year, now includes supervisors from 27 jurisdictions, including both advanced and emerging markets. 1 - in the joint forum, we and other u. s. financial regulators – including bank, securities, and insurance regulators – work with financial regulators from other countries to enhance financial regulation that spans different financial sectors. - in the senior supervisors group, we and other u. s. supervisors have worked over the past few years with the supervisors of other major financial firms to share information and sponsor joint reviews of risk management and disclosure. - in bilateral and regional supervisory groups, we have discussed regulatory issues with europe, china, india, japan and other supervisors from the western hemisphere. some of these groups have quite a long history. both the committee on the global financial system and the basel committee date back to the 1970s. these groups are not formal international organizations. they have operated with only a modest support staff – often provided, along with a location for meetings, by the bank for international settlements ( bis ). the bulk of their activity is conducted by officials from the national regulators themselves. the fsb is a relatively new group, established in the wake of the asian financial crisis in 1999 as the financial stability forum, with a broad mandate to promote global financial stability. the fsb is an unusual combination of international standard - setting bodies ( including those mentioned above ) and a range of national authorities responsible for financial stability : treasury departments and ministries of finance, central banks, and financial supervisory agencies. 2 major international organizations such as the bis and the international monetary fund ( imf ) also participate. 3 at the request of the g - 20 in april 2009, the financial stability forum's name was changed to the financial stability board, its membership was expanded to add the emerging market countries from the g - 20, and its mandate was strengthened. the financial crisis has underscored the importance of the original motivation for creating what is now the fsb. the connections among financial market sectors, and between macroeconomic policy and