expectations from banks ; the guidelines adopted an integrated approach to risk management. even earlier, in february 1999, banks were advised to set up an asset liability management framework to manage liquidity and interest rate risk. in this context, i would like to make following observations : a ) the need to accelerate the speed at which banks have been moving towards establishment of risk management systems b ) the need to achieve convergence with regulatory and supervisory expectations / requirements while deciding on the sophistication of methods to be adopted. c ) developing appropriate risk management architecture, mis and skill enhancement d ) the need to integrate risk management process with capital planning strategies the current business environment, with its pointed emphasis on corporate governance, is making it critical for banks to explain their risk profiles publicly with greater clarity and detail than ever before. risk is still a complex and technical subject, so achieving transparency will not be easy. internal constituents, analysts, ratings agencies, investors, and regulators all have varying levels of understanding of advanced risk measurement techniques. all will require continuing education before the market as a whole reaches a common understanding of risk. in particulars, direct stakeholders in any transaction need to be aware of the risks involved. for the third pillar of basle ii ( market discipline ) to be efficacious, it is important that the stakeholders are aware of the risks involved in the banks ’ transactions and the systems in place to manage the risks. in this context, the importance of an appropriateness policy for banks offering various products to the corporate clients can't be overemphasised. the risk management systems developed by banks would include a lot of attention of top management to the suitability of it structure including issues of connectivity, designing an mis format that is risk focused, setting up an organization to manage risk that ensures segregation of risk assessment from operations, frequent review of risk management systems to ensure there is no slippage and last but not the least, to develop appropriate skills within the organization. in this context, it must be kept in view that risk management is not the sole concern of the risk management department but rather a culture that pervades the whole organization with specific support from the top management. iii. recent initiatives in risk management in india, over the years various steps have been taken to strengthen the risk management architecture, both at the bank specific level as well as a broader systemic level. alm guidelines : most banks have put in place an alm framework. however there is lot to be done to internalize

in corporate bonds. prudential requirements of the sectoral regulations would, however, need to be balanced with the need for a developed bond market which ultimately would be in the interest of all the financial market participants. expanding access to the foreign investors there is a growing demand to open up the corporate debt market and, in particular infrastructure debt segment to the fiis / qfis. there is also a demand for fiscal concession to the fiis. it has to be kept in view that based on our experience and lessons learnt from the global financial crisis, we have adopted a cautious approach. nevertheless, the limits and bis central bankers ’ speeches conditions for investments by the fiis have been liberalized particularly for the infrastructure bond as mentioned in para 12 above. the limits available so far, however, have not been used up significantly. the recent announcement regarding reduced withholding tax to five per cent for foreign currency denominate infrastructure bonds and its likely extension for the rupee infrastructure bond investments by the fiis may lead to greater utilization of the available limits. settlement systems / trading platform the success of order matching trading platform in g - sec market can act as guidance for setting up of order - matching trading platforms for the corporate debt market. considering that the trading platforms on exchanges are non - functional, a quote driven anonymous screen based trading platform could possibly bring about the desired focus on trading in corporate debt market due to reduction in transaction cost and improved time efficiency in execution of trades. efficient bankruptcy regime a robust, timely, effective and efficient bankruptcy regime is essential to development of corporate debt market from investors ’ point of view. steps, such as, reforming bankruptcy law, early resolution of bankruptcy cases and streamlining the procedures relating to insolvency would go a long way in achieving the same. the issue of insolvency of financial institutions established under statutes bi - lateral netting among them during bankruptcy also need resolution. possibly as recommended by the committee on financial sector assessment, a comprehensive insolvency regime for banks and other financial institutions need to be expedited. f. implementation of basel iii and corporate bond market many steps have been taken to promote bank lending to infrastructure sector like liberalisation of credit exposure norms, liberal dispensation for classification of investments under htm category, expansion of list of businesses included under infrastructure sector, etc. as a result, banks ’ exposure to infrastructure lending has grown by more than four times between 2005 and 2011. however, two factors are limiting the ability