y v reddy : implementation of financial standards and codes : indian perspective and approach speech by dr yv reddy, deputy governor of the reserve bank of india, at the conference on international standards and codes organised by the imf - world bank, held in washington dc, 7 - 8 march 2001. the appendix mentioned by dr reddy can be obtained from the reserve bank of india. * * * in this paper it is proposed to describe the indian perspective and approach in regard to the implementation of international financial standards and codes advocated by the financial stability forum ( fsf ). the indian efforts in this direction also seek to complement and support the ongoing initiatives of the g - 20 aimed at encouraging implementation of standards and codes among member countries. the paper is schematized as follows. section i explains india ’ s stand on global initiatives for implementation of standards and codes. while section ii narrates india ’ s association with global efforts in evolving and promoting financial standards and codes, section iii describes the indian approach to the implementation. section iv mentions the institutional arrangements that have been put in place to guide the process of implementation. section v provides an account of the work processes followed by advisory groups in the course of preparation of reports. section vi indicates the current status, while section vii touches on the plans for following up on the submission of reports. section viii brings out some highlights of indian experience so far. i. india ’ s stand 1. 1 india is fully supportive of the need to observe certain minimum universally accepted standards in areas relevant to the maintenance of stability in the international monetary system, including increased transparency in formulation and implementation of monetary and financial policies and improvements in dissemination of relevant data. the establishment of a high - powered standing committee on international financial standards and codes ( standing committee ) underscores india ’ s commitment to this international enterprise. at the same time, india has been voicing, in the international fora, some of its concerns regarding the manner of international financial institutions spearheading the implementation and assessment of codes and standards. india advocates a voluntary approach, fair, equitable, and continuous process taking duly into account the institutional and legal structure and stage of development in different countries. 1. 2 although the notion of a code of good practices is intuitively appealing, the temptation to prescribe universally valid model codes which do not allow for differences in institutional development, legislative framework and, more broadly, different stages of development must be avoided. sometimes there is a tendency to recommend the practices of major industrial

framework in the form of the public key infrastructure - pki, which is in conformity to the provisions of the information technology act, 2000. an effective security policy which would offer a shared vision of how the controls in the workplace should be implemented with the objective of protecting data, information and eventually, the economic value of the organisation. this has to be supplemented by education and training in these areas and reinforced by the actions and concerns of the top management so that a culture of security can be created. these controls have to be supplemented by surveillance, monitoring and auditing to detect unusual usage patterns and deficiencies. banks have to put in place such a policy and ensure that it is being implemented effectively, and then audit the it related functions so as to ensure that there are no lapses or deviations from the approved information security policy. another major challenge relates to the bridging the divide caused by distances. today, banking has broken all geographical barriers and demand from customers relates to ‘ anywhere and anytime banking ’. currently, it based offerings such as internet and mobile banking have provided customers with the means for meeting the requirement of being able to perform banking transactions from anywhere. the death of distances have also necessitated that banks in india do not merely look inward. developments elsewhere in the world have also a strong impact on the efforts of indian banks and these have to be factored in an always vibrant world of technology based banking. added to this is the fact that markets have shrunk digitally and this gap would reduce further in the morrow. it would be necessary to prepare ourselves for functioning in a very small knit shrunk world. information availability across a large section of people will bring in the challenge of being able to process such large masses of information. this is an opportunity not only for the banking sector but for other sectors including the it industry as well. banks will, therefore, brace themselves for co - operation and co - existence and geographical boundaries may move away into oblivion just as sharing of resources ( such as atms ) has already commenced propagation. we have all heard of the digital divide which is a challenge to be overcome by the banking industry as well. while the average indian customer may be as technology savvy or even better than his western counterpart, the cultural aspects of his relationships may necessitate a personal touch to the offerings of banks. further, all the technology based offerings by banks have a bias towards the major towns and cities and the need for reaching the mid size cities as well