Indian Banking: Adopting Basel Norms

Dr. Ahindra Chakrabarti

Introduction
Banking is one of the most heavily regulated businesses in the world and it is no
exception in case of India, specially after economic reforms started in 1991-92. No one
can start a bank without some government’s permission to do so, and no one can close a
bank without the government’s approval. Yet, the extensive rules that constrain bankers’
services, behaviour, and performance are changing as well. Regulators looking over the
industry are paying more attention to its risk and to signals from the private marketplace.
Increasingly it is recognized today that government rules and regulations can only do so
much, and that private decision- makers-businesses and consumers-can do as much or
more to determine which banks are most accommodating and efficient and which should
be allowed to fail (or, perhaps, be absorbed by other, better managed institutions). This
paper has been divided into four parts. Part I deals with overall Indian Ba nking scenario.
Part II deals with Basle norms. Part III deals with Indian Central Bank’s response to
implement Basle norms. Part IV deals with Basle II norms and India’s preparedness to
implement it. Part V conclusion. Key Words.

Part 1
Indian Banking Scenario
In India banking industry is divided into sub categories of Scheduled Commercial Bank
and scheduled cooperative bank. Commercial Bank again is subcategorized as: (a) public
sector bank; (b) private sector bank; (c) foreign banks; (d) Regional Rural Bank. Below
presented five year data relating to the assets and liabilities, income and profit of the
scheduled commercial banks in India.

1
 (Rs in Billion)
Balance Sheet
As at March 31 2000 2001 2002 2003 2004
Assets
Cash and balance with 853.80 845.04 867.60 861.18 1,132.46
Central Bank
Balances with banks & 812.89 1,059.08 1,184.76 746.71 822.23
money at call and short
notice
Investments 4,136.42 4,917.80 5,872.62 6,937.59 8020.66
Loans and Advances 4,454.37 5,261.24 6,455.91 7,404.66 8641.43
Net Fixed Assets 154.80 162.21 201.03 202.78 214.03
Other Assets 687.89 706.61 770.03 837.82 919.40
Total Assets 11,100.16 12,951.98 15,351.96 16,990.74 19,750.19

Liabilities
Equity Share Capital 186.11 191.05 214.81 216.04 223.27
Reserves and Surplus 438.34 486.47 626.84 762.71 942.42
Deposits 9,002.74 10,552.01 12,025.74 13,556.54 15,751.43
Borrowings 453.11 545.82 1,057.10 874.69 964.90
Other Liabilities 1,019.86 1,176.62 1,427.48 1,580.76 1,868.16
Total Liabilities 11,100.16 12,951.98 15,351.96 16,990.74 19,750.19

Total assets of the banking system has gone up from Rs 11,100.16 billion in 2000 to Rs
19750.19 billion registering a CAGR of 15.49 percent. Credit (Loans and Advances)
have gone up from Rs 4454.37 billion to Rs 8641.43 billion during the same period.
Investments has gone up from Rs 4136.42 billion to Rs 8020.16 billion during the same
period. The CAGR for credit registered a growth rate for 18.01 percent and for
investments it has registered and growth rate of 18.00 percent.

Presented below income statement of the banking system over five years. As could be
seen Total Income has gone up from Rs.1153.97 billion in 2000 to Rs 1837.67 billion in
2004. The growth rate (CAGR) during this period is 12.34 percent. Net profit during the
same period has gone up from Rs 73.76 billion to Rs 222.71 billion registering a high
growth rate of 31.82 percent.

2
 (Rs in
Billion)
Income Statement
Year ended March 31 2000 2001 2002 2003 2004
A Total Income (I+II) 1,153.97 1,320.73 1510.28 1723.55 1,837.67
I i) Interest/discount on 475.33 554.02 594.29 686.34 700.51
advances/bills
ii) Income on Investments 440.20 503.52 572.76 623.99 657.98
iii) Interest on balances with 54.61 64.48 79.40 68.04 55.25
Central Bank /other inter bank
iv) Others 24.46 28.88 23.13 29.19 26.55
Interest Income(I+ii+iii+iv) 994.61 1,150.90 1269.58 1407.56 1,440.28
II Other Income 159.36 169.83 240.70 315.99 397.39

B Total Expenses
III Interest Expended 693.16 781.46 875.15 936.07 875.67
IV Payments to an provisions for 185.01 232.51 218.14 236.41 261.95
employees
V Other Operating Expenses 91.11 109.28 118.63 144.25 173.35
Operating Expenses ((IV +V) 276.12 341.80 336.77 380.66 435.30
C Operating Profit (A-B) 184.69 197.47 298.36 406.82 526.71
D Provisions & Contingencies 110.83 132.40 183.28 236.53 304.00
Net Profit (C-D) 73.76 65.07 115.09 170.30 222.71

Regulations and Policies

The main legislation governing commercial banks in India is the Banking Regulation
Act 1949. The provisions of the Banking Regulation Act 1949 are in addition to the
Companies Act, 1956 and any other law for the time being in force is applied in
management of banks in India. Other important laws include the Reserve Bank of India
Act.The Central Bank in India is known as Reserve Bank of India. The Central Bank
issues , from time to time, additional guidelines /directions to be followed by the
commercial bank in India.

The Reserve Bank of India

Central Bank in India is known as the Reserve Bank of India, was established as a
shareholders bank on April, 1935. Its share capital was Rs.5 crores divided into 5 lakhs
fully paid up shares of Rs.100 each. In the beginning except shares of Rs.2,20,000, the
entire share capital was owned by private shareholders. The Central Government had
acquired 2,200 shares which made it eligible to appoint its own nominees on the Reserve

3
Bank’s Board of Directors. The Reserve Bank of India retained this character for about
fourteen years. Over this period important changes had taken place in the country. India
got freedom on August 15, 1947 and the nationalist government decided to initiate the
process of planned economic development. It was felt that a state owned Central Bank
was better suited to the requirement of the country. The issue of Reserve Bank’s
nationalization had first come to the fore at the close of the World War II, but the actual
nationalization was done on January 1,1949. It is pertinent to point out that over the
years opinions had changed in favour of state owned Central Bank s and some European
Central Banks including the Bank of England and the Bank of France had been
nationalized.

Part II
Basel - I
The last two decades saw unprecedented changes in the banking and financial systems all
over the world. While England, the historical seat of banking, witnessed a process of
deregulation of the financial system at the beginning of the 1970s (which was soon to
cross the Atlantic to the United States), India moved in the opposite direction, tightening
controls over the financial system by nationalizing the major commercial banks of the
country. It was done at a time when the Indian banking system, having established itself
domestically in strength and stability, was about to move towards global integration. For
that, it had to wait for a quarter of a century.

In India, the decade beginning 1990 saw the cumulation of the crisis of the regulated
regime with the worsening of the external balance of payments, a low foreign exchange
reserve, raging inflation and dwindling GNP. It was felt that a major restructuring of the
Indian economy was needed. On the external front, the signing of the General
Agreement on Tariffs and Trade, (GATT) fo llowed by membership of the World Trade
Organization (WTO), paved the way for global integration.

Financial Sector Reforms: While the real sectors of the economy were being liberated
by gradual loosening of controls, financial sector reforms were to move in tandem to

4
support the restructuring process. The Narasimham Committee 1 appointed for this
purpose, recommended sweeping changes that came to be regarded as landmarks in the
history of banking in India.

The objectives of the reforms package were threefold: (a) liberalization of all markets by
quickening the process of deregulation; (b) increasing competitiveness in all spheres of
economic activity, and (c) ensuring financial/fiscal discipline in all economic agents, be it
the public or private sector2 .

In the late 1980s, the Basel Committee on Banking Supervision took initiative to develop
a risk-based capital adequacy standard that would lead to international convergence of
supervisory regulations governing the capital adequacy of internationally active banks.
The dual objectives for the framework were to strengthen the soundness and stability of
the international banking system and, by ensuring a high degree of consistency in the
framework’s application, to diminish the sources of competitive inequality among
international banks.

This initiative resulted in the Basel Capital Accord of 1988. The Basel Accord comprises
a definition of regulatory capital, measures of risk exposure, and rules specifying the
level of capital to be maintained in relation to these risks. It introduced a de facto capital
adequacy standard, based on the risk-weighted composition of a bank’s assets and off-
balance sheet exposures, that ensures that an adequate amount of capital and reserves is
maintained to safeguard solvency. While the original targets of the Accord were
international banks, the capital adequacy standard has been adopted and implemented in
more than 100 countries and now forms an integral part of any risk-based bank
supervisory approach. Constant review of the le vel of capital maintained in both the
banking system and in individual banks is an important part of the financial risk
management process, which seeks to ensure that a bank’s capital position is consistent
with its overall risk profile and business strategy.

Reserve Bank of India, Indian Central Bank responded to Basle Capital Accord of 1988,
by issuing necessary guidelines and directives to time Indian banking practice at par with

1
Reserve Bank of India, Report of the Committee on the Financial System, November 1991.
2
Sengupta, Arjun, ‘Financial Sector and Economic Reforms in India’ (Economic and Political Weekly, 7
January, 1995), pp 39-44.

5
international norms keeping the Indian practices and economic within the preview and
consideration. The effort initiated is given in the next part.

Part III

Indian Central Bank took prompt initiative to respond to the framework of Basle in terms
of implementation of the 1988 Accord. In an effort to implement, monitor prudential
norms in the area of credit, advances and control the functioning of the banks, the Central
Bank of the country came out with comprehensive guidelines in the following areas:
: Pre conditions of effective Banking and Supervision;
: Licensing and Structure
: Prudential Regulations and Requirements
: Liquidity Risk Management
: Methods of Ongoing Banking Supervision
All these guidelines make an effort to capture the following areas of bank’s functioning
and its assets and liabilities and income expenses as could be seen below:

Licensing Requirement: Commercial banks in India are required under the Banking
Regulation Act 1949 to obtain a license from the Central Bank to carry on banking
business. Before granting the license, the Central Bank satisfies itself necessary that
conditions are complied with, including (i) that the bank has the ability to pay its present
and future depositors in full as their claims accrue; (ii) that the affairs of the bank will not
be or are not likely to be conducted in a manner detrimental to the interests of present or
future depositors; (iii) that the bank has adequate capital and earnings prospects; and (iv)
that the public interest will be served if such license is granted to the bank. The Central
Bank can cancel the license if the bank fails to meet the above conditions or if the bank
ceases to carry on banking operations in India. The Central Bank requires banks to
furnish statements, information and certain details relating to their business. It issues
guidelines for commercial banks on several matters including recognition of income,
classification of assets, valuation of investments, maintenance of capital adequacy and
provisioning for impaired assets.

6
Supervision of Banks: The Central Bank has set up a Board for Financial Supervision,
under the chairmanship of the Governor of the Central Bank . The appointment of the
auditors of banks is subject to the approval of the Central Bank . The Central Bank can
direct a special audit of banks in the interest of the depositors or in the public interest.

Regulations relating to the Opening of Branches: Banks are required to obtain licenses
from the Central Bank to open new branches. Permission is granted based on factors
such as the financ ial condition and history of the company, its management, adequacy of
capital structure and earning prospects and the public interest. The Central Bank has the
right to cancel the license for violations of the conditions under which it was granted. In
India branches are located in rural and semi- urban areas. Central Bank may require the
Banks to open branches in rural areas. 3

Capital Adequacy Requirements: Banks are subject to the capital adequacy

requirements of the Central Bank, which, based on the guidelines of the Basle Committee
on Banking Regulations and Supervisory Practices, 1998, requires Banks to maintain a
minimum ratio of capital to risk adjusted assets and off-balance sheet items of 9 per cent 4 ,
at least half of which must be Tier I capital. The total capital of a banking company is
classified into Tier I and Tier II capital. Tier I capital, the core capital, provides the most
permanent and readily available support against unexpected losses. It comprises paid-up
capital and reserves consisting of any statutory reserves, free reserves and capital reserve
pursuant to the Income-Tax Act, 1961 as reduced by equity investments in subsidiaries,
intangible assets, and losses in the current period and those brought forward from the
previous period.

Tier II capital consists of undisclosed reserves, revaluation reserves (at a discount of 55

per cent), general provisions and loss reserves (allowed up to a maximum of 1.25 per cent
of risk weighted assets), hybrid debt capital instruments (which combine certain features
of both equity and debt securities) and subordinated debt. Any subordinated debt is
subject to progressive discounts each year for inclusion in Tier II capital and total

3
Rural area is defined as a center with a population of less than 10,000. A semi-urban area is defined as a
center with a population of greater than 10,000 but less than 100,000.
4
Most of the bank now have a capital adequacy ratio of 12 percent.

7
subordinated debt considered as Tier II capital cannot exceed 50 per cent of Tier I capital.
Tier II capital cannot exceed Tier I capital. With a view to the building up of adequate
reserves to guard against any possible reversal of the interest rate environment in the
future due to unexpected developments, the Central Bank has advised banks to build up
an Investment Fluctuation Reserve of a minimum of 5 per cent of the bank’s investment
portfolio within a period of five years from fiscal 2002. This reserve has to be computed
with respect to investments held for trading and available for sale categories. Investment
Fluctuation Reserve was earlier included in Tier II capital. From October 10, 2005
Central Bank has allowed Investment Fluctuation Reserve as tier I capital.

Risk adjusted assets and off-balance sheet items considered for determining the capital
adequacy ratio are the risk weighted total of specified funded and non-funded exposures.
Degrees of credit risk expressed as percentage weighting are assigned to various balance
sheet asset items and conversion factors to off-balance sheet items. The value of each
item is multiplied by the relevant weight or conversion factor to produce risk-adjusted
values of assets and off-balance-sheet items. Guarantees and letters of credit are treated
as similar to funded exposure and are subject to similar risk weight.

All foreign exchange and gold open position limits carry a 100 per cent risk weight. A
risk weight of 2.5 per cent to cover market risk has to be assigned in respect of the entire
investment portfolio effective March 31, 2001 over and above the risk weights for credit
risk in non-government and non-approved securities. Banks and financial institutions are
required to assign a 100 per cent risk weight for all state government guaranteed
securities issued by defaulting entities. Investment by banks in equity shares, preference
shares eligible for capital status, subordinated debt instruments, hybrid debt capital
instruments and other approved instruments approved as in the nature of capital attract
100 per cent risk weight for credit risk for capital adequacy purposes. The aggregate risk
weighted assets are taken into account for determining the capital adequacy ratio.

Asset Classification and Provisioning: In April 1992, the Central Bank issued formal
guidelines on income recognition, asset classification, provisioning standards and
valuation of investments applicable to banks, which are revised from time to time. The

8
principal features of these Central Bank guidelines, in relation to loans, debentures, lease
assets, hire purchases and bills are set forth below:

Non-Performing Assets: Until year-end fiscal 2003, a non-performing asset was an asset
in respect of which any amount of interest or principal was overdue for more than two
quarters (i.e. 180 days). From April 1, 2004, an advance is a non-performing asset where:
(a) interest and/or installment of principal remained overdue for a period of more than 90
days in respect of a term loan;
(b) the account remained “out-of-order” for a period of more than 90 days in respect of an
overdraft or cash credit;
(c) the bill remained overdue for a period of more than 90 days in case of bills purchased
and discounted;
(d) interest and/or installment of principal remained overdue for two harvest seasons but
for a period not exceeding two half- years in the case of an advance granted for
agricultural purposes; and
(e) any amount to be received remained overdue for a period of more than 90 days in
respect of other accounts.
Asset Classification: Regarding income recognition, asset classification and
provisioning pertaining to the advances portfolio of banks, non-performing assets are
classified as below:

Sub-Standard Assets: Assets that are non-performing assets for a period not exceeding 12
months. In such cases, the current net worth of the borrower / guarantor or the current
market value of the security charged is not enough to ensure recovery of dues to the
banks in full. Such an asset has well-defined credit weaknesses that jeopardize the
liquidation of the debt and are characterised by the distinct possibility that the bank will
sustain some loss, if deficiencies are not corrected.

Doubtful Assets: Assets that are non-performing assets for more than 12 months.
Loss Asset: Assets on which losses have been identified by the bank or internal or
external auditors or the Reserve Bank India inspection but the amount has not been
written off fully.

9
There are separate guidelines for projects under implementation which are based on the
achievement of financial closure and the date of approval of the project financing.

Restructured Assets: The Central Bank has separate guidelines for restructured assets. A
fully secured standard asset can be restructured by reschedulement of principal
repayments and/ or the interest element, but must be separately disclosed as a restructured
asset. The amount of sacrifice, if any, in the element of interest, measured in present
value terms, is either written off or provision is made to the extent of the sacrifice
involved.

Similar guidelines apply to sub-standard assets. The sub-standard accounts which have
been subjected to restructuring, whether in respect of principal instalment or interest
amount are eligible to be upgraded to the standard category only after the specified
period, i.e., a period of one year after the date when first payment of interest or of
principal, whichever is earlier, falls due, subject to satisfactory performance during the
period. To put in place an institutional mechanism for the restructuring of corporate debt,
the Central Bank has devised a corporate debt restructuring system.

Provisioning and Write-offs: Provisions are based on guidelines specific to the

classification of the assets.

Regulations relating to Making Loans: The provisions of the Banking Regulation Act
govern the making of loans by banks in India. The Central Bank issues directions
covering the loan activities of banks. Some of the major guidelines of Central Bank,
which are now in effect, are as follows:
(a) The Central Bank has prescribed norms for bank lending to non-bank financial
companies and financing of public sector disinvestments.
(b) Banks are free to determine their own lending rates but each bank need to declare its
prime lending rate as approved by its Board of Directors. Each bank should also
indicate the maximum spread over the prime lending rate for all credit exposures
other than retail loans. Banks are also given freedom to lend at a rate below the prime
lending rate in respect of creditworthy borrowers and exposures. Interest rates for
certain catego ries of advances are regulated by the Central Bank.

10
(c) In India a banking company is prohibited from entering into any commitment for
granting any loans or advances to or on behalf of any of its Directors, or any firm in
which any of its Directors is interested as partner, manager, employee or guarantor, or
any company.
Directed Lending
Priority Sector Lending: The Central Bank requires commercial banks to lend a certain
percentage of their net bank credit to specific sectors (known as priority sectors), such as
agriculture, small-scale industry, small businesses and housing finance. Total priority
sector advances should be 40% of net bank credit with agricultural advances required to
be 18% of net bank credit and advances to weaker sections required to be 10% of net
bank credit, and 1% of the previous year’s net bank credit required to be lent under the
Differential Rate of Interest scheme.

Credit Exposure Limits

The Central Bank has prescribed credit exposure limits for banks and long-term lending
institutions in respect of their lending to individual borrowers and to all companies in a
single group (or sponsor group).

(a) Exposure ceiling for a single borrower is 15 per cent of capital funds effective March
31, 2002. Group exposure limit is 40 per cent of capital funds effective March 31,
2002. In case of financing for infrastructure projects, the single borrower exposure
limit is extendable by another 5 per cent, i.e., up to 20 per cent of capital funds and
the group exposure limit is extendable by another 10 per cent (i.e. up to 50 per cent of
capital funds). Capital funds is the total capital as defined under capital adequacy
standards (Tier I and Tier II capital).
(b) Non-fund based exposures are calculated at 100 per cent and in addition, banks
include forward contracts in foreign exchange and other derivative products, like
currency swaps and options, at their positive market value (including potential future
exposure) in determining individual or group borrower exposure ceilings, effective
from April 1, 2003.
Credit exposure is the aggregate of:
(i) all types of funded and non-funded credit limits;
(ii) investments in shares, debentures, bonds and units of mutual funds;

11
 (iii) facilities extended by way of equipment leasing, hire purchase finance and
factoring services;
(iv) advances against shares, debentures, bonds and units of mutual funds to stock
brokers and market makers;
(v) bank loan for financing promoters’ contributions;
(vi) bridge loans against equity flows/issues; and
(vii) financ ing of initial public offerings.
To ensure that exposures are evenly distributed, the Central Bank requires banks to fix
internal limits of exposure to specific sectors. These limits are subject to periodic review
by the banks.

Regulations relating to Investments and Capital Market Exposure Limits

Credit exposure limits specified by the Central Bank in respect of lending to individual
borrowers and borrower groups apply in respect of these investments. There are no limits
on the amount of investments by banks in non-convertible debt instruments. The
exposure of banks to capital markets by way of investments in shares, convertible
debentures, units of equity-oriented mutual funds and loans to brokers, should not exceed
5 per cent of outstanding domestic advances (excluding inter bank lending and advances
outside India and including commercial paper) at March 31 of the previous fiscal year
and investments in shares, convertible debentures and units of equity-oriented mutual
funds should not exceed 20 per cent of the bank’s net worth.

In April 1999, the Central Bank, in its monetary and credit policy, stated that the
investment by a bank in subordinated debt instruments, representing Tier II capital,
issued by other banks and financial institutions should not exceed 10 per cent of the
investing bank’s capital including Tier II capital and free reserves.

The Central Bank has also issued guidelines on investments by banks in non-Statutory
Liquidity Ratio securities issued by companies, banks, financial institutions, central and
state government sponsored institutions and Special Purpose Vehicles(SPVs) These
guidelines apply to primary market subscriptions and secondary market purchases. Banks
are prohibited from investing in non-Statutory Liquidity Ratio securitie s with an original
maturity of less than one year, other than commercial paper and certificates of deposits.

12
Banks are also prohibited from investing in unrated securities. A bank’s investment in
unlisted non-Statutory Liquidity Ratio securities may not exceed 10 per cent of its total
investment in non-Statutory Liquidity Ratio securities as at the end of the preceding fiscal
year. However, investments in security receipts issued by securitisation or reconstruction
companies registered with the Central Bank and asset backed securities and mortgage
backed securities with a minimum investment grade credit rating ,this rule will not apply.

Consolidated Supervision Guidelines

From fiscal 2003, Commercial Banks are to follow and present consolidated accounting
and became subject to consolidated supervision for banks. The principal features of these
guidelines are:
(1) Banks are required to prepare consolidated financial statements intended for
public disclosure.
(2) Banks are required to submit to the Central Bank, consolidated prudential returns
reporting their compliance with various prudential norms on a consolidated basis,
excluding insurance subsidiaries. Compliance on a consolidated basis is required
in respect of the following main prudential norms:
(2) Single borrower exposure limit of 15 per cent of capital funds (20 per cent of
capital funds provided the additional exposure of up to 5 per cent is for the
purpose of financing infrastructure projects);
(3) Borrower group exposure limit of 40 per cent of capital funds (50 per cent of
capital funds provided the additional exposure of up to 10 per cent is for the
purpose of financing infrastructure projects);
(4) Deduction from Tier-I capital of the bank, of any shortfall in capital adequacy of a
subsidia ry for which capital adequacy norms are specified; and
(5) Consolidated capital market exposure limit of 2 per cent of consolidated assets
and 10 per cent of consolidated net worth.

Banks’ Investment Classification and Valuation Norms

The Central Bank also issued guidelines on investment classification and norms for
valuation are as below:

13
 The entire investment portfolio is required to be classified under three categories:
(a) held to maturity, (b) held for trading and (c) available for sale. Banks should
decide the category of investment at the time of acquisition.
• Held to maturity investments compulsorily include (a) recapitalisation bonds, (b)
investments in subsidiaries and joint ventures and (c) investments in debentures
deemed as advance. Held to maturity investments also include any other
investment identified for inclusion in this category subject to the condition that
such investments cannot exceed 25% of the total investment excluding
recapitalisation bonds and debentures.
Profit on the sale of investments in the held to maturity category is appropriated to
the capital reserve account after being taken in the income statement. Loss on any
sale is recognised in the income statement.
• Investments under the held for trading category should be sold within 90 days; in
the event of inability to sell due to adverse factors including tight liquidity,
extreme volatility or a unidirectional movement in the market, the unsold
securities should be shifted to the available for sale category.
• Profit or loss on the sale of investments in both held for trading and available for
sale categories is taken in the income statement.
• Shifting of investments from or to held to maturity may be done with the approval
of the Board of Directors once a year, normally at the beginning of the accounting
year; shifting of investments from available for sale to held for trading may be
done with the approval of the board of Directors, the Asset Liability Management
Committee or the Investment Committee; shifting from held for trading to
available for sale is generally not permitted.

Held to maturity securities are not marked to market and are carried at acquisition cost or
at an amortized cost if acquired at a premium over the face value. Securities classified as
available for sale or held for trading are valued at market or fair value as at the balance
sheet date. Depreciation or appreciation for each basket within the available for sale and
held for trading categories is aggregated. Net appreciation in each basket, if any, that is
not realised is ignored, while net depreciation is provided for.Investments in security
receipts or pass through certificates issued by asset reconstruction companies or trusts set

14
up by asset reconstruction companies are valued at the net asset value announced
periodically by the asset reconstruction company based on the valuation of the underlying
assets.

Restrictions on Investments in a Single Company

No bank may hold shares in any company, whether as owner or as pledge or mortgagee,
exceeding the lower of 30 per cent of the paid up share capital of that company and 30
per cent of its own paid up share capital and reserves.

Limit on Transactions through Individual Brokers

Guidelines issued by the Central Bank require banks to empanel brokers for transactions
in securities. These guidelines also require that a disproportionate part of the bank’s
business should not be transacted only through one broker or a few brokers. The Central
Bank specifies that not more than 5 per cent of the total transactions in debt securities
through empanelled brokers can be transacted through one broker. If for any reason this
limit is breached, the Central Bank has stipulated that the Board of Directors of the bank
concerned should be informed on a half- yearly basis of such occurrences.

Prohibition on Short -Selling

The Central Bank does not permit short selling of securities by banks.

Regulations Relating to Deposits

The Central Bank has permitted banks to independently determine rates of interest
offered on term deposits. However, banks are not permitted to pay interest on current
account deposits. Further, banks may only pay interest of 3.5% per annum on savings
deposits. In respect of savings and time deposits accepted from employees, the Central
Bank some times allow banks to pay an additional interest of 1% over the interest
payable on deposits from the public.

Domestic time deposits have a minimum maturity of 15 days (seven days in respect of
deposits over Rs. 1.5 million with effect from April 19, 2001) and a maximum maturity
of 10 years. Time deposits from non-resident Indians denominated in foreign currency
have a minimum maturity of one year and a maximum maturity of three years.

15
Starting April 1998, the Central Bank has permitted banks the flexibility to offer varying
rates of interests on domestic deposits of the same maturity subject to the following
conditions:
• Time deposits are of Rs. 1.5 million and above; and
• Interest on deposits is paid in accordance with the schedule of interest rates disclosed
in advance by the bank and not pursuant to negotiation between the depositor and the
bank.
The Central Bank has, effective September 15, 2003, stipulated that the interest rate on
NRE deposits should not exceed 100 basis points over the US dollar LIBOR/ swap rates
for the corresponding maturity.

Deposit Insurance
Demand and time deposits of up to Rs. 1,00,000 accepted by Indian banks have to be
mandatorily insured with the Deposit Insurance and Credit Guarantee Corporation, a
wholly-owned subsidiary of the Central Bank. Banks are required to pay the insurance
premium for the eligible amount to the Deposit Insurance and Credit Guarantee
Corporation on a semi-annual basis. The cost of the insurance premium cannot be passed
on to the customer.

Regulations relating to Knowing the Customer and Anti-Money Laundering

The Central Bank has issued several guidelines relating to identification of depositors and
has advised banks to put in place systems and procedures to control financial frauds,
identify money laund ering and suspicious activities, and monitor high value cash
transactions. The Central Bank has also issued guidelines from time to time advising
banks to be vigilant while opening accounts for new customers to prevent misuse of the
banking system for perpetration of frauds.

To open an account, a prospective customer is required to be introduced by an existing

customer who has had his own account with the bank for at least six months and has
satisfactorily conducted that account, or a well-known person in the local area where the
prospective customer resides.

16
Legal Reserve Requirements
Cash Reserve Ratio: A banking company such as us is required to maintain a specified
percentage of its demand and time liabilities, excluding inter-bank deposits, by way of
balance in current account with the Central Bank. The cash reserve ratio can be a
minimum of 3% and a maximum of 20% pursuant to Section 42 of the Central Bank Act.
At present, the cash reserve ratio is 5%.

The Central Bank pays no interest on the cash reserves up to 3% of the demand and time
liabilities and pays interest at the bank rate, currently 6%, on the balance. The cash
reserve ratio has to be maintained on an average basis for a fortnightly period and should
not be below 70% of the required cash reserve ratio on any day of the fortnight.

Statutory Liquidity Ratio

In addition to the cash reserve ratio, a banking company is required to maintain a
specified minimum percentage of its net demand and time liabilities by way of liquid
assets like cash, gold or approved securities. The percentage of this liquidity ratio is fixed
by the Central Bank from time to time, and it can be a minimum of 25% and a maximum
of 40% pursuant to section 24 of the Banking Regulation Act 1949. At present, the
Central Bank requires banking companies to maintain a liquidity ratio of 25%. The
Banking Regulation (Amendment) and Miscellaneous Provisions Bill, 2003 introduced in
the Indian Parliament proposed to amend section 24 of the Banking Regulation Act 1949
to remove the minimum Statutory Liquidity Ratio stipulation, thereby giving the Central
Bank the freedom to fix the Statutory Liquidity Ratio below this level.

Regulations on Asset Liability Management

At present, banks are required to draw up asset liability gap statements separately for
rupee and for four major foreign currencies. These gap statements are prepared by
scheduling all assets and liabilities according to the stated and anticipated re-pricing date,
or maturity date. These statements have to be submitted to the Central Bank on a
quarterly basis. The Central Bank has advised banks to actively monitor the difference in
the amount of assets and liabilities maturing or being re-priced in a particular period and
place internal prudential limits on the gaps in each time period, as a risk control
mechanism. Additionally, the Central Bank has asked banks to manage their asset-

17
liability structure such that the negative liquidity gap in the 1-14 day and 15–28 day time
periods does not exceed 20% of cash outflows in these time periods. This 20% limit on
negative gaps was made mandatory with effect from April 1, 2000. In respect of other
time periods, up to one year, the Central Bank has directed banks to lay down internal
norms in respect of negative liquidity gaps. It is not mandatory for banks to lay down
internal norms in respect of negative liquidity gaps for time periods greater than one year.

Foreign Currency Dealership

The Central Bank grants authorised dealers’ licence to deal in foreign exchange. Under
this license, banks are granted permission to:
• engage in foreign exchange transactions in all currencies;
• open and maintain foreign currency accounts abroad;
• raise foreign currency and rupee denominated deposits from non resident Indians;
• open documentary credits;
• grant import and export loans;
• handle collection of bills, funds transfer services;
• issue guarantees; and
• enter into derivative transactions and risk management activities that are incidental to
our normal functions authorised under our organizational documents.

Hence Bank’s foreign exchange operations are subject to the guidelines specified by the
Central Bank in the exchange control manual. As an authorised dealer, Banks are
required to enroll as a member of the Foreign Exchange Dealers Association of India,
which prescribes the rules relating to foreign exchange business in India.

Reserve Fund
Any bank incorporated in India is required to create a reserve fund to which it must
transfer not less than 20% of the profits of each year before dividends. If there is an
appropriation from this account, the bank is required to report the same to the Central
Bank within 21 days, explaining the circumstances leading to such appropriation. The
Government of India may, on the recommendation of the Central Bank, exempt a bank
from the requirements relating to reserve fund.

18
Opening of new place of business
In India, there are certain restrictions on the banking companies regarding opening of
new place of business and transfer of existing place of business which may hamper the
operational flexibility of the Bank.

In terms of Section 25 of The Banking Regulation Act 1949, each banking company has
to maintain assets in India which is not less than 75% of its demand and time liabilities in
India which in turn may prevent the Bank from creating the overseas assets and
exploiting overseas business opportunities.

Restrictions on Payment of Dividends

The Central Bank has also provided guidelines on payment of dividend applicable to the
dividends declared for the accounting year ended March 31, 2004 onwards. Banks, which
qualify to declare dividends consequent upon compliance with the eligibility
requirements above would be eligible to pay dividends without obtaining the prior
approval of the Central Bank, subject to further compliance with the following:

1. The dividend payout ratio does not exceed 33. 33 %.

2. The proposed dividend should be payable out of the current year’s profit.
3. Dividend payout ratio is calculated as a percentage of ‘dividend payable in a year’
(excluding dividend tax) to ‘net profit during the year’.
4. In case the profit for the relevant period includes any extraordinary profits/
income, the payout ratio shall be computed after excluding such extra-ordinary
items for reckoning compliance with the prudential payout ratio ceiling of
33.33%.
5. The financial statements pertaining to the financial year for which the bank is
declaring a dividend should be free of any qualifications by the statutory auditors,
which have an adverse bearing on the profit during that year. In case of any
qualification to that effect, the net profit should be suitably adjusted while
computing the dividend payout ratio.

19
Restriction on Share Capital and Voting Rights
Banks can issue only Equity Shares. The Banking Regulation Act 1949 specifies that no
shareholder in a banking company can exercise voting rights on poll in excess of 10% of
total voting rights of all the shareholders of the banking company.

Regulatory Reporting and Examination Procedures

The Central Bank is empowered under the Banking Regulations Act to inspect a bank.
The Central Bank monitors prudential parameters at quarterly intervals. To this end and
to enable off-site monitoring and surveillance by the Central Bank, banks are required to
report to the Central Bank on aspects such as:
(1) assets, liabilities and off-balance sheet exposures;
(2) risk weighting of these exposures, the capital base and the capital adequacy ratio;
(3) un audited operating results for each quarter;
(4) asset quality;
(5) concentration of exposures;
(6) connected and related lending and the profile of ownership, control and
management; and
(7) other prudential parameters.
The Central Bank also conducts periodic on-site inspections on matters relating to any
bank’s portfolio, risk management systems, internal controls, credit allocation and
regulatory compliance, at intervals ranging from one to three years. The inspection
report, along with the report on actions taken by the Bank, has to be placed before the
Board of Directors of the Bank. On approval by the Board of Directors, Bank is required
to submit the report on actions taken by the Bank to the Central Bank. The Central Bank
also discusses the report with the management team including the Managing Director of
the Bank.

The Central Bank also conducts on-site supervision of selected branches with respect to
their general operations and foreign exchange related transactions.

Every Bank required to obtain prior approval of the Central Bank before it appoints its
Chairman and Managing Director and any other Whole time Directors and fix their
remuneration. The Central Bank is empowered to remove an appointee to the posts of

20
Chairman, Managing Director and Whole time Directors on the grounds of public interest
or interest of depositors or to ensure our proper management. Further, the Central Bank
may order meetings of the Board of Directors of any bank to discuss any matter in
relation to the Bank, appoint observers to such meetings and in general may make such
changes to the management as it may deem necessary and may also order the convening
of a General Meeting of the bank’s shareholders to elect new Directors.

Central Bank has issued separate guidelines effective June 25, 2004 laying down the due
diligence and “fit and proper” criteria applicable to Directors of private banks.

Penalties
The Central Bank may impose penalties on banks and their employees in case of
infringement of regulations under the Banking Regulation Act 1949. The penalty may be
a fixed amount or may be related to the amount involved in any contravention of the
regulations. The penalty may also include imprisonment.

Foreign Ownership Restrictions

The Government of India regulates foreign ownership in private sector banks. Under
guidelines recently issued by the Government, total foreign ownership in a private sector
bank from all sources (FDI, FII, NRI) cannot exceed 74% of the paid-up capital. The
limit of 74% will be reckoned by taking the direct and indirect holding. At all times, at
least 26% of the paid up capital of the private sector bank will have to be held by
residents. In addition, the restrictions on shareholding as provided under “Restrictions on
Transfer of Shares” shall be equally applicable to Foreign Direct investment.
Shares held by foreign institutional investors under portfolio investment schemes through
stock exchanges cannot exceed 49% of the paid- up capital. Individual NRI portfolio
investment is restricted to 5% with the aggregate limit for all NRI’s restricted to 10% but
can be raised to 24% with the approval of Board / General Body.

Special Status of Banks in India

The special status of banks is recognised under various statutes including the Sick
Industrial Companies Act, 1985, Recovery of Debts Due to Banks and Financial

21
Institutions Act, 1993, and the Securitisation Act. As a bank, they are entitled to certain
benefits under various statutes including the following:

The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 provides for
establishment of Debt Recovery Tribunals for expeditious adjudication and recovery of
debts due to any bank or Public Financial Institution or to a consortium of banks and
Public Financial Institutions.

The Securitisation Act focuses on improving the rights of banks and financial institutions
and other specified secured creditors as well as asset reconstruction companies by
providing that such secured creditors can take over management control of a borrower
company upon default and/or sell assets without the intervention of courts, in accordance
with the provisions of the Securitisation Act.

Central Bank Guidelines on Ownership and Governance in Private Sector Banks

Central Bank has laid down a comprehensive framework of policy in a transparent
manner relating to ownership and governance in the Indian private sector banks. The
broad princip les underlying the framework of policy relating to ownership and
governance of private sector banks would have to ensure that:

(i) The ultimate ownership and control of private sector banks is well diversified. While
diversified ownership minimises the risk of misuse or imprudent use of leveraged
funds, it is no substitute for effective regulation. Further, the fit and proper criteria, on
a continuing basis, has to be the overriding consideration in the path of ensuring
adequate investments, appropriate restructuring and consolidation in the banking
sector. The pursuit of the goal of diversified ownership will take account of these
basic objectives, in a systematic manner and the process will be spread over time as
appropriate.
(ii) Important Shareholders (i.e., shareholding of 5 per cent and above) are ‘fit and
proper’, as laid down in the guidelines dated February 3, 2004 on acknowledgement
for allotment and transfer of shares.
(iii) The directors and the CEO who manage the affairs of the bank are ‘fit and proper’ as
indicated in circular dated June 25, 2004 and observe sound corporate governance
principles.

22
(iv) Private sector banks have minimum capital/net worth for optimal operations and
systemic stability.
(v) The policy and the processes are transparent and fair.

Minimum capital
The capital requirement of existing private sector banks should be on par with the entry
capital requirement for new private sector banks prescribed in Central Bank guidelines of
January 3, 2001, which is initially Rs.200 crore, with a commitment to increase to Rs.300
crore within three years. In order to meet with this requirement, all banks in private sector
should have a net worth of Rs.300 crore at all times. The banks which are yet to achieve
the required level of net worth will have to submit a time bound programme for capital
augmentation to Central Bank. Where the net worth declines to a level below Rs.300
crore, it should be restored to Rs. 300 crore within a reasonable time.

Shareholding
i. The Central Bank guidelines on acknowledgement for acquisition or transfer of shares
issued on February 3, 2004 will be applicable for any acquisition of shares of 5 per
cent and above of the paid up capital of the private sector bank.
ii. In the interest of diversified ownership of banks, the objective will be to ensure that no
single entity or group of related entities has shareholding or control, directly or
indirectly, in any bank in excess of 10 per cent of the paid up capital of the private
sector bank. Any higher level of acquisition will be with the prior approval of Central
Bank and in accordance with the guidelines of February 3, 2004 for grant of
acknowledgement for acquisition of shares.
iii. Where ownership is that of a corporate entity, the objective will be to ensure that no
single individual/entity has ownership and control in excess of 10 per cent of that
entity. Where the ownership is that of a financial entity the objective will be to ensure
that it is a well established regulated entity, widely held, publicly listed and enjoys
good standing in the financial community.
iv. Banks (including foreign banks having branch presence in India)/FIs should not
acquire any fresh stake in a bank’s equity shares, if by such acquisition, the investing
bank’s/FI’s holding exceeds 5 per cent of the investee bank’s equity capital as
indicated in Central Bank circular dated July 6, 2004.

23
v. As per existing policy, large industrial houses will be allowed to acquire, by way of
strategic investment, shares not exceeding 10 per cent of the paid up capital of the
bank subject to Central Bank’s prior approval. Furthermore, such a limitation will
also be considered if appropriate, in regard to important shareholders with other
commercial affiliations.
vi. In case of restructuring of problem/weak banks or in the interest of consolidation in
the banking sector, Central Bank may permit a higher level of shareholding, including
by a bank.

Part IV

The world financial system has seen considerable changes since the introduction of the
Basel Accord. The volatility of financial markets has increased in the last decade, and
there has been a significant degree of financial innovation in products and services as
well as in institutional structure. There also have been incidents of economic turbulence
leading to widespread financial crisis, in Asia in 1997 and in Eastern Europe in 1998.
The risks that internationally active banks had to deal with have become much more
complex. There has been an increasing concern that the 1988 Accord did not provide an
effective means to ensure that capital requirements match a bank’s true risk profile ; in
other words, it was not sufficiently risk sensitive. The risk measurement and control
aspects of the Accord also needed to be addressed and improved. In 1999, the Basel
Committee started consultations leading to issuance of a new capital Accord that would
be better attuned to the complexities of the modern financial world. A new framework of
Basle Recommendations eme rged.

The a new framework aimed to provide a comprehensive approach to measuring banking

risks, its fundamental objectives remain the same as those of the 1988 Accord: to
promote safety and soundness of the banking system and to enhance the competitive
equity of banks. In addition to minimum capital requirements, it is proposed that the new
capital framework include two additional pillars: an enhanced supervisory review process
and effective use of market discipline. All the three pillars are mutually reinforcing.

24
Although the framework has been developed keeping in mind the internationally active
banks, supervisory authorities worldwide are being encouraged to consider adopting this
revised framework at such time as consistent with their broader supervisory priorities.
Each national supervisor is expected to consider carefully the benefits of the revised
framework in the context of its domestic banking system when developing a timetable
and approach for implementation. Given the resource and other constraints, these plans
may extend beyond the Committee's implementation dates, and also implementation of
Basel II in the near future may not be the first priority for supervisors in several non-G 10
countries. The IMF and World Bank are of the view that future financial sector
assessments would not be conducted on the basis of adoption of or compliance with the
revised framework, but would be based on the country's performance relative to the
chosen standards. Supervisors are being encouraged to consider implementing key
elements of the supervisory review and market discipline components of the new
framework even if the Basel II minimum capital requirements are not fully implemented
by the implementation date. The Accord Implementation Group (AIG) of the Basel
Committee on Banking Supervision (BCBS) is entrusted to promote consistency in the
Framework's application by encouraging supervisors to exchange information on
implementation approaches.

The revised framework as mentioned to be based on three pillar (minimum capital

requirements. supervisory review, and market discipline) approach. In the revised
framework, some of the key elements of the 1988 capital adequa cy framework have been
retained, including the general requirement for banks to hold total capital equivalent to at
least 8 per cent of their risk-weighted assets. An attempt has, however, been made to
arrive at significantly more risk-sensitive capital requirements -to institute internal
ratings- based (IRB) approach in place of the broad brush standardised approach of 1988
Accord, that are conceptually sound and at the same time pay due regard to particular
features of the present supervisory and accounting systems in individual member
countries. A range of options for determining the capital requirements for credit risk and
operational risk have been provided.

The need for banks and supervisors to give appropriate attention to the second
(supervisory review) and third (market discipline) pillars of the revised Framework has

25
also been highlighted. The interactions between regulatory and accounting approaches at
both the national and international level can have significant consequences for the
measures of capital adequacy and for the costs associated with the implementation of
these approaches. In the most recent consultations, issues such as changes in the approach
to the treatment of expected losses and unexpected losses and to the treatment of
securitisation exposures, changes in the treatments of credit risk mitigation and revolving
retail exposures, have been incorporated. The need for banks using the advanced IRB
approach to incorporate the effects arising from economic downturns into their loss-
given-default (LGD) parameters - has also been highlighted. It is, however, necessary to
ensure that the Framework keeps pace with market developments and advances in risk
management practices.

The new capital adequacy framework (Basel II) also raises a variety of imp1ementation
challenges for both supervisors and banks. Taking this into account, the Financial
Stability Institute (FSI), in coordination with BCBS, developed a Basel II Implementation
Assistance Questionnaire to identify Basel II implementation plans and to determine
corresponding capacity building needs in the non-BCBS supervisory community. Out of
the 107 jurisdictions in Africa, Asia, the Caribbean, Latin America, the Middle East and
non-BCBS Europe, 88 non-BCBS jurisdictions intend to adopt Basel II. Therefore, taking
into account the 13 BCBS member countries, more than 100 countr1es worldwide will be
implementing Basel II.

With regard to the timeframe for adopting the new capital adequacy framework, Basel II
would be implemented widely across regions during 2007 -09. One of the major drivers
for moving to Basel II in non-BCBS jurisdictions seems to be the intended
implementation of this framework locally by foreign controlled banks or local branches
of foreign banks. For Pillar I -minimum capital requirements -the foundation internal
ratings-based (IRB) approach is envisaged to be the most used methodology for
calculating capital requirements for credit risk (in terms of banking assets moving to
Basel Il) closely followed by the (simplified) standardized approach. As regards
allocating capital for operational risk, the basic indicator approach is anticipated to be
widely employed across region. The challenge regarding Pillar 2 implementation relates
to acquiring and upgrading the human and technical resources necessary for the review of

26
banks' responsibilities under Pillar I. An additional area of concern is the coordination of
home and host supervisors in the cross-border implementation of Basel II. With regard to
Pillar 3, the primary challenge seems to be that of aligning supervisory disclosures with
international and domestic accounting standards.

Basel - II
With increasing financial sector liberalization and emergence of financial conglomerates,
financial sector stability has emerged as a key objective of the Central Bank in India.
The recent emphasis in the regulatory frame work in India is on ensuring good
governance through “fit and proper” owners, directors and senior managers of the banks
infuses a qualitative dimension to the conventional discharge of financial regulation
through prescribing prudential norms and encouraging market discipline. In totality,
however, these measures interact to produce a positive impact on the overall efficiency
and stability of the banking system in India. There has been a marked improvement in
capital adequacy, asset quality and the profitability of the banking system. Commercial
banks in India will start implementing Basel II with effect from March 31, 2007. They
will adopt the Standardised Approach for credit risk and the Basic Indicator Approach for
operational risk, initially. After adequate skills are developed, both at the banks and also
at supervisory levels, some banks may be allowed to migrate to the Internal Rating Based
Approach. Banks have also been advised to formulate and operationalise the Capital
Adequacy Assessment Process as required under Pillar II of the New Framework.

Implementation of Basel II will initially require more capital for banks in India in view of
the fact that operational risk is not captured under Basel I, and the capital charge for
market risk was not prescribed until recently. Consequently, banks are exploring all
avenues for meeting the capital requirements under Basel II.

Above all, capacity building, both in banks and the regulatory bodies is a serious
challenge, especially with regard to adoption of the advanced approaches. The Central
Bank has accordingly initiated supervisory capacity-building measures to identify the
gaps and to assess as well as quantify the extent of additional capital which may be
required to be maintained by such banks. As of now banks are constantly pushing the
frontiers of risk management. Compulsions arising out of increasing competition, as well

27
as agency problems between management, owners and other stakeholders are inducing
banks to look at newer avenues to augment revenues, while trimming costs.

Part V

To day Indian banking industry is in change. Rather than being something in particular, it
is continually booming something new - offering new services, merging and
consolidating into much larger and more complex businesses adopting new technologies
that seem to change faster than most of us can comprehend and facing a new and
changing set of rules. Despite all of these changes sweeping through this vital industry,
there are still something in banking that never seem to change. It is an probably will
always remain to be service industry providing an intangible product that is hard to
differentials from the products offered by competitors.

Indian banking has come a long way in the post reform era. There is significant
improvement in the performance of the commercial banking system measured in terms of
both operating as well as net profits. Simultaneously, in view of the growing concerns
about financial stability, prudential norms have been gradually tightened on par with
international best practices. Banks have also been accorded greater operational flexibility
in conducting their business. As part of the process, commercial banks have adopted
several initiatives to strengthen their business practices like greater product
sophistication, increased customer orientation, improved risk management, particularly
credit risk management techniques, updated MIS, greater focus on electronic banking
channels and diversification into newer business areas.

Besides India has got in succession Central Bankers and professional team who has left
their mark in managing the banking system despite turbulence in neighbouring countries
especially the financial turmoil which struck Asia in mid 1997.

28
Reference:
1. BIS (2004), 'Basel II: International Convergence of Capital Measurement and
Capital Standards: a Revised Framework " Basel Committee Publications No.107,
June.
2. BIS (2004), 'Implementation of Basel II: Practical Considerations', Basel
Committee Publications No.107 , July.
3. BIS (2004), 'Implementation of the New Capital Adequacy Framework in Non-
Basel Committee Member Countries', Financial Stability Institute Occasional
Paper No.4, July.
4. Basel II The Revised Framework of June 2004; No 178 April 2005 United
Nations Conference on Trade and Development, Discussion Papers, United
Nations.
5. World Bank Institute (2004)WBI Learning Resources Series: Aligning Financial
Supervisory Structures with Country Needs.
6. Peter S. Rose, 1999, Commercial Bank Management, McGraw Hill International
Additions, Singapore.
7. World Bank Institute (2003): Analyzing and Managing Banking Risk, A
framework for Assessing Corporate Governance and Financial Risk- Hennie van
Greuning ; Sonja Brajovic Bratanovic.
8. Report on Currency and Finance (2003, 2004) – Reserve Bank of India.
9. Report on Trend and Progress of Banking in India 2001-02, 2002-03, 2003-04.
Reserve Bank of India.
10. Banking Regulation Act 1949.

A Brief Profile of the Author

Dr. Ahindra Chakrabarti, Professor, Banking and Finance.
Chairman, Finance Area.
International Management Institute, B-10 Qutab Institutional Area, Tara Crescent,
New Delhi 110 016, India.
E-mail:ahindrachakrabarti@imi.edu

29