methodology has not been based on extensive statistical analysis or modelling or on determination of build - up of asset bubbles. it is largely judgmental, based on trends in aggregate credit and sectoral credit growth in the macro - economic settings. for this reason, it has not been rule bound which will require either some model or at least some measurement of systemic risk and its sensitivity to the prudential parameters. while the objective of the countercyclical policies is to increase the resilience of the system by building buffers to withstand shocks during downturns, the broader objective is to lean against the wind during the boom phase to dampen the credit and asset price boom. a more ambitious objective would be to ensure stable credit supply through the cycle - through booms and busts. however, our limited experience shows that the countercyclical measures appear to be more effective in moderating the credit supply during the upturn than in increasing the credit supply during the downturn. during the upturn in the economy, the countercyclically raising of capital and / or provisioning for standard assets would moderate the flow of credit by raising the cost and thereby impacting the demand. however, during the downturn, the increase in credit supply on release of buffers does not seem as plausible. the economic agents whose balance sheets are affected due to the downturn would be risk averse as would be the banks who would be excessively cautious thus restricting credit supply. the behaviour of economic agents during both booms and busts seems to be a case of “ disaster myopia ”. the likely asymmetric impact of countercyclical measures is another challenge for regulators to revive the economy during downturns. today, the choice of instruments for conducting countercyclical policies and their relative effectiveness as also the interaction of these policies with other policies, particularly the monetary policy, is a major area of research. while in our case, the monetary and countercyclical policies have been in the same direction so far, it appears to us, that varying the provisioning requirements may have been more effective than varying risk weights in moderating credit flow to the specific sectors. this is because, since the average capital bis central bankers ’ speeches adequacy ratio of banks operating in india has been well above 12 per cent for the last many years ( as on december 2010, it was above 14 per cent ), risk weights may not always be effective in dampening the growth of credit

recall the experience with services of direct sales agents, employed by banks, which in some cases, generated resentment among the customers. an element of sensitivity and sensibility has to underscore the behavior of such agents when banks outsource credit card operations etc. with emphasis on ensuring appropriate behavior by personnel involved in debt collection and ensuring employment of fair and prudent processes. coercive actions, in the wake of increasing customer awareness can throw open gates of litigation on such grounds as negligence, mental agony or hurt, defamation, invasion of privacy and trespassing, with all their obvious and extended legal connotations. when one talks of redressing customer grievances and complaints, an obvious reference to the banking ombudsman scheme is but inevitable. the scheme operates on the principles of mediation and arbitration resulting in awards. in order that such schemes function unhindered and for the common cause of scores of aggrieved customers, it is imperative that banks implement awards passed by ombudsmen in right earnest. rbi attaches a lot of importance to this function and compliance by banks in this area is monitored through rbi ’ s supervisory processes and appropriate regulatory disclosures diligently. thus, serving the bis central bankers ’ speeches customer satisfactorily is at once, an art, an inexact science as also a mandatory obligation governed by regulatory dictate and institutional arrangements to ensure compliance. to conclude, customer service deserves an outlook that puts a check on targets sought to be achieved by customer service executives by way of a rigor of compliance with extant rules and regulations. profit seeking is the basic ethos that governs any business entity but the same cannot and must not override the genuine demands and requirements of customers. i am sure, the employees being honored today have set an example in not just customer service alone but also for adhering to the compliance diktat. i wish them all success in their career and also congratulate axis bank on their endeavour to enhance the awareness on customer service. thank you. bis central bankers ’ speeches