the depreciation, countries remained wary of their exchange rate overshooting on the downside, especially given the possibility that some domestic corporations may have un - hedged foreign currency debt. there were also concerns about the inflationary consequences of exchange depreciation, worry that the short term boost to competitiveness will not increase exports when partner - country growth is sluggish, and imported intermediate content of exports is generally increasing. there remained the risk that tighter monetary policy in hitherto capital recipient countries can slow growth and exacerbate a pattern of slowing growth. significant falls in stock markets, if they persist, could also hurt growth through wealth effects. in fact, spillovers are not inconsequential even for industrial countries. 10 year rates in japan, germany and uk were all impacted after may 22, 2013. recent trends in indian financial markets 19. in india, the impact of the fed announcement has been striking, as in the case of many other emerging markets, especially those with current account deficits. the net fii disinvestment from the indian debt market since may 23, 2013 ( till august 30, 2013 ) was around us $ 10. 4 billion as compared to net investment of us $ 5. 6 billion during the period january 1 - may 22, 2013. there were reversals in fii investments into equity segment from india as well, with net fii disinvestment into equities since may 23, 2013 ( till august 30, 2013 ) standing at usd 2. 8 billion as compared to the investment of usd 14. 35 billion during bis central bankers ’ speeches the period january 1 - may 22, 2013. the impact on indian financial markets was one of the most severe amongst emerging markets. between may 22 and september 4, 2013, i. the currency depreciated by 17. 3 per cent ; ii. india ’ s equity market was down by 7. 9 per cent ; iii. 10 year interest rates were higher by 123 basis points ; during this period, us 10 year yields rose by about 100 bps. the volatility in financial markets spread like a contagion through the interconnectedness in markets with the rupee depreciation weighing on the stock market, foreign outflows from the debt market further aggravating the fx markets and impacting yields as also the equity markets. things have improved considerably since early september though the risks of heightened volatilities persist, as i will

an effective resolution framework. these tools primarily facilitate optimal structuring of credit facilities, ability to change ownership / management, and help restructuring of stressed assets. a framework was put in place for greater transparency in sale of stressed assets by banks with a view to ensuring the sale is at market determined prices. 2 / 4 bis central bankers'speeches 14. the system of ‘ prompt corrective action ’ ( pca ) under which specific regulatory actions are taken by rbi if banks breach certain trigger points has recently been revised. this ensures timely supervisory action in case of problem banks following a rule based approach. the pca ’ s objective and design is to strengthen a bank ’ s fundamentals and imbue confidence. 15. weak credit discipline in banks, right from the appraisal to sanction stage, is one of the main bank specific factors in the build - up of stressed assets. the risk based supervisory process of the reserve bank keeps flagging some of these risks which are taken up with the institutions concerned for remedy. however, in order to ensure an effective enforcement action on the specific violations / breaches, a separate enforcement department has been established. the mandate of the department is to develop a rule based, consistent framework to deal with breaches of law, rules and directions. effective deterrence enforced through such actions is expected to contribute to strengthening the credit culture overall. 16. during the annual financial inspections ( afis ) of the banks, it is usually observed that there is a divergence between the npas and provisions declared by the banks and those assessed during the afi process. this has adverse implications on timely recognition of actual risk, trustworthiness and transparency of books of accounts, management effectiveness, etc. accordingly, in order to address this asymmetry, disclosure requirements have been put in place – banks have to disclose in their annual accounts the details of such divergences where these exceed specified thresholds. 17. the recent decision by sebi that requires listed entities to disclose defaults on, inter alia, bank loans within one working day can make a huge difference in the credit culture. if my understanding is correct : effectively, a one - day default by bank debtors will result in all bank loans to the debtor entity being generally classified as ‘ default ’ by the rating agencies, with attendant implications for risk weights on such exposures and capital requirements by the banking system. iii. institutional measures central repository of information on large credits ( crilc ) 18. setting