The measures taken since mid-September 2008 have substantially assuaged liquidity stress in domestic financial markets arising from the contagion of adverse external developments.
Prudential Measures
(1) Internal Working Group constituted to lay down the roadmap for adoption of a suitable framework for cross-border supervision and supervisory cooperation with overseas regulators to submit its report by mid-November 2008.
(2) An approach paper on the supervision of financial conglomerates to be finalised by end-November 2008.
(3) Working Group constituted to study and recommend a suitable supervisory framework for activities of SPVs/trusts set up by banks and to submit its report within three months.
(4) An approach paper on appropriate model of risk-based supervision to be finalised by mid-December 2008.
(5) An appropriate supervisory framework including a revised off-site surveillance system for overseas operations of Indian banks to be finalised by end-November 2008.
(6) Based on their off-site returns banks were identified and detailed information on the sources and deployment of their funds were sought, and concerns were conveyed to them for taking appropriate action.
(7) Supervisory reviews of banks' exposure to agricultural commodities carried out as on March 31, 2008 and June 30, 2008.
(8) Indian banks with overseas presence and branches of foreign banks functioning in India have migrated to Basel II Framework with effect from March 31, 2008 and remaining banks are required to migrate to the Basel II framework with effect from March 31, 2009.
(9) Guidelines related to liquidity risk management to be significantly revised.
(10) Guidelines on stress testing to be upgraded.
Image: A trader checks the quality of grains at a wholesale market in Mumbai. | Photograph: Pal Pillai/AFP/Getty Images
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