duvvuri subbarao : the imf and latest economic developments in the indian subcontinent statement by mr duvvuri subbarao, governor of the reserve bank of india, as leader of the indian delegation to the international monetary and financial committee ( imfc ), international monetary fund, washington dc, 16 april 2011. statement on behalf of mr pranab mukherjee, finance minister of india and member imfc representing the constituency consisting of bangladesh, bhutan, india and sri lanka. * * * mr. chairman, 1. there have been significant developments in the global economy since we met in the fall of 2010. the imf too has moved on several fronts under its mandate which has strengthened its position in a changing world. there are several key questions confronting us today : is the recovery assured in the face of still turbulent financial conditions and upward pressures on commodity prices? how resilient is the international monetary system to future shocks? will the ongoing reforms empower the imf and make it more effective in anchoring global monetary and financial stability? the global economy and financial markets 2. a variety of risks, including political and social turmoil in parts of the world combined with natural disasters, have made the global recovery vulnerable. financial conditions have turned volatile and uncertain, with risks of adverse feedback loops into the global economy. recurring sovereign debt fears have affected market confidence. in the crisis - affected economies, financial systems are yet to be fully repaired. while the sense of crisis has waned, new challenges have surfaced. 3. the global recovery may be jeopardized by a sustained rise in oil prices. apart from the inflationary pressures confronting particularly the emerging and developing countries, there is the danger of a slowdown in the global economy unless oil prices moderate from current levels. furthermore, since the summer of 2010, several natural calamities and consequent food supply constraints have collided with the post - crisis resurgence of demand. world food prices have surged considerably due to concerns about low future supplies because of bad weather and low inventories, raising concerns about food security. speculative movements in commodity derivative markets are also causing volatility in prices. global challenges and the role of the imf 4. the overarching problems confronting the international monetary system stem from weaknesses in detecting and communicating early warnings of impending crises and management of global liquidity. this calls for fundamental reform of the international monetary system. it is also important to evolve a mechanism to address the challenges of stemming volatile capital flows

., lending from their books. besides addressing regulatory arbitrage with nbfcs, computation of microfinance loan portfolio of an nbfc - mfi as a percentage of total assets also ensures that nbfc - mfis focus on their core business. responsibilities of the board & conduct the new framework, while laying down the fundamental principles, places greater onus on the boards of the regulated entities as they are now also required to have board approved policies in certain areas such as assessment of household income and indebtedness, pricing of microfinance loans and conduct of employees, etc. the framework in particular emphasizes on having a system for recruitment, training and monitoring of employees. training modules for employees and outsourced personnel should include programs to inculcate appropriate behavior towards customers and their conduct towards customers should also be incorporated appropriately in their compensation matrix. the guidelines related to adherence to fair practices in recovery of loans and outsourcing of activities have also been reiterated. one important aspect of these guidelines is that outsourcing of any activity by the regulated entity does not diminish its obligations and it shall be accountable for inappropriate behaviour by its employees or employees of the outsourced agency and shall provide timely grievance redressal for both. given the responsibilities entrusted on the boards, the directors on the boards of the lenders should take active interest in the policies governing the microfinance loans in order to ensure that these policies result in a fair treatment to the microfinance borrowers. expectations from the industry 5 / 7 bis - central bankers'speeches the revised regulatory framework provides significant flexibility to the lenders to fulfil the needs of their microfinance customers in a comprehensive and customized manner. with increasing competition and level playing field for all regulated entities in the sector, one of the differentiating factors going forward will be the customers'experience with the lenders'services. the new framework has put in place a few ground rules to address concerns around misconduct towards microfinance borrowers. conduct towards customer being integral to ethical business practices, it becomes the responsibility of everyone involved in the process to ensure that the guidelines on conduct are followed in both letter and spirit and the customer is treated fairly and respectfully at all times. to ensure borrowers'protection from coercive recovery practices, new framework, also requires putting in place a mechanism for engagement with borrowers facing repayment related difficulties, prohibition on harsh recovery practices, extensive due diligence process