short supply. the demand will not only stem from domestic institutions but it will also be from foreign institutions and countries. the challenge before indian banks is therefore to revitalise themselves by hiring the right talent, investing in training and bringing about a vibrant transformation in their dna, in effect doing what sumantra ghoshal, the management guru and founding dean of the indian school of business, called changing the “ smell of the workplace ”. successful organizations, he felt, exude a vibrancy which uniquely defines the “ smell of the workplace ”. ghoshal describes the smell of the air in the forest of fontainebleau, 40 miles south of paris, the vibrancy which spurs the casual walker to run, jog or do something, and is in essence revitalising. he compares it to downtown kolkata in summer which is hot and drains energy and vitality. most large companies in india and abroad, he felt end up creating downtown kolkata in summer inside themselves. the smell of the workplace then becomes encapsulated in an environment of constraints, where jobs / relationships are only contracts and actions are defined by control and compliance. as opposed to it, successful companies promote stretch, which means doing more with self discipline, as opposed to control there is support and enhancing collaboration across the organisation through combination of support on the one hand and trust on the other. the real bis central bankers ’ speeches source of competitive advantage in organizations is not merely in technology but in the behaviour of individuals in the organisation where each one of them takes initiative, collaborates, has self confidence, has commitment to himself, to their teams, to their units, and to their organisation. the challenge before management is to use the vast unused potential in people and make ordinary people produce extraordinary results thereby changing the smell of the workplace. b. leveraging technology a recent article in the economic times dated december 27, 2011 detailed how e - governance initiative helped check grass root pension fraud. in keregodu village in karnataka ’ s mandya district, senior citizens, all 65 - plus, face an endless wait in front of the local post office for their pension money orders. hours later they are told by a post office official – “ the money had already been collected by someone ”. in this south - eastern district of karnataka, thousands of pensioners haven ’ t received their pension and entitlements for months – it is siphoned off in transit. even worse, out of the 2, 95

price risks correctly. they are mark - to - model instead of mark - to - market. to put it bluntly, if my pension is invested in long - term illiquid assets, i would prefer my pension company to be run by a younger ceo. that way, i would be able to hold him or her accountable for how these investments pan out – avoiding moral hazard problems. a second risk relates to liquidity. a larger share of illiquid assets in portfolios increases liquidity risks. from 2023, pension companies'liquidity needs will become even larger when the requirement for central clearing of interest rate swaps and other derivatives is introduced. central clearing reduces the systemic risks of derivatives transactions. but potentially large liquidity needs require sound liquidity management in order to avoid the risk of forced sales of assets. setting aside more liquid assets to cover liquidity risks also means fewer funds available to invest countercyclically. pension funds will then have less flexibility to buy assets traded at distressed price levels. this may also be side 5 af 7 unfortunate from a systemic perspective, if pension funds are less able to play a stabilising role in periods of market stress. as a central banker, i am not – as many of you – burdened with promises of delivering certain levels of return to pension scheme members. however, i am tasked with keeping tabs on the stability of the financial system as a whole. therefore, i would have serious concerns about investment strategies based on continuously increased risk - taking in the search for yield. in its recent financial stability report, the imf also identifies increasing holdings of riskier and more illiquid assets by institutional investors as a key vulnerability in the global financial system. expectations and behaviour should be adjusted to avoid insecurity this brings me to my last and most important point today. going forward, there is no substitute for ( 1 ) acknowledging the conditions we face today, ( 2 ) increasing transparency about implications for pension plans, and finally, ( 3 ) adjusting expectations and behaviour accordingly. a growing number of pension plans are recognising the impact of the low rate environment and adjusting expected return assumptions. in denmark, the council for pension projections recently reduced their return assumptions over a ten - year horizon for eight out of ten asset classes. by reducing the stock of defined benefit plans, pension funds have transferred a large share of the risk from the low yield environment to present and future pensioners. today, many pension savers have a higher