code, computers and networks. but when non - specialists actually ask for digital solutions, they frequently fail because they oversimplify the job of it specialists. for example, they fail to accurately specify the goal and the desired properties of an application. partly because they don ’ t speak the right language and regard the actual solutions as a black box ; partly because they simply don ’ t bother. unfortunately, incoherent concepts at the outset frequently lead to dirty fixes and workarounds, both of which turn out to be costly and inconvenient in the long run. and, frustratingly for itexperts, it makes them look incompetent in the end. also, co - workers are often not sufficiently aware of the various other challenges which it departments face in their day - to - day work. just think of the need to make a software application stable, secure and efficient, to make it adaptable to changes of purpose or to changes in the “ outside world ", and to make it useable for the “ dumbest assumable user ". these are regular trade - offs. they require strategic decisions. but in this regard, top management needs to understand the trade - offs first. this leads to another, overarching issue : scarce resources. top management is often reluctant to allocate sufficient resources to an it project. this is quite a common finding in our supervisory inspections. that puts long - lasting solutions out of reach. while this may often be due to “ short termism ” ( as it projects often pay out only in the mid - or long term ), it can also be caused by underestimating their value. 2 / 6 bis central bankers'speeches let me now turn to a second bias of top management, namely underrating it and cyber risks. nowadays, a large majority of households and enterprises will have experienced cyberattacks for themselves. but even though awareness of potential threats has risen in previous years, it is still the case that, far too often, incidents are interpreted as a stroke of fate, as mere bad luck. to be fair, having reliable defence mechanisms is indeed challenging for many applications and larger it systems because threats constantly evolve. and so does technology, opening up new loopholes all the time – just take the weaknesses in computer processors which came to light just recently. still, the likelihood of a successful cyberattack can be significantly reduced by measures that are well - known – at least in it

a prominent objective especially during a period of economic downturn. recognising the importance of effective asset quality management, reserve bank has issued various guidelines to banks, from time to time, on various aspects of asset quality management. preventive management 6. reserve bank has advised banks that the management of credit risk should receive the top management ’ s attention and the process should encompass : a ) measurement of risk through credit rating / scoring ; b ) quantifying the risk through estimating expected loan losses and unexpected loan losses c ) risk pricing on a scientific basis ; and d ) controlling the risk through effective loan review mechanism and portfolio management. 7. further, reserve bank has also advised the banks to put in place a robust credit risk management system which is sensitive and responsive to various factors affecting credit risk. the guidelines entail involvement of top management, including the board of directors of the bank in actively managing the credit risk of the banks. banks are required to put in place proactive credit risk management practices like annual / half - yearly industry studies and individual obligor reviews, credit audit which entails periodic credit calls that are documented, periodic visits of plant and business site, and at least quarterly management reviews of troubled exposures / weak credits. recent regulatory initiatives 8. recently, in january 2014, the reserve bank of india had released a comprehensive “ framework for revitalising distressed assets in the economy ”. the framework outlines a corrective action plan that will incentivise early identification of problem cases, timely restructuring of accounts which are considered to be viable, and taking prompt steps by banks for recovery or sale of unviable accounts. in addition, to address the issue of information asymmetry as also to identify the problem early, a central repository of information on large credits ( crilc ) to collect, store, and disseminate credit data to lenders, was set up. under this arrangement, banks are reporting credit information, including classification of an account as sma to crilc on all their borrowers having aggregate fund - based and non - fund based exposure of ₹50 million and above with them. bis central bankers ’ speeches 9. while having a proper credit risk management is very important for managing asset quality, another issue which is equally important is proper structuring of the credit facilities extended to various borrowers. while granting credit facilities, banks should set realistic repayment schedules on the basis of a proper analysis of cash flows of the borrowers. this