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Risk Management

|Introduction. |
|The significant transformation of the banking industry in India is clearly evident from the changes that have occurred in the |
|financial markets, institutions and products. While deregulation has opened up new vistas for banks to argument revenues, it has |
|entailed greater competition and consequently greater risks. Cross- border flows and entry of new products, particularly |
|derivative instruments, have impacted significantly on the domestic banking sector forcing banks to adjust the product mix, as |
|also to effect rapid changes in their processes and operations in order to remain competitive to the globalized environment. |
|These developments have facilitated greater choice for consumers, who have become more discerning and demanding compelling banks |
|to offer a broader range of products through diverse distribution channels. The traditional face of banks as mere financial |
|intermediaries has since altered and risk management has emerged as their defining attribute. |
|Currently, the most important factor shaping the world is globalization. The benefits of globalization have been well documented |
|and are being increasingly recognized. Integration of domestic markets with international financial markets has been facilitated |
|by tremendous advancement in information and communications technology. But, such an environment has also meant that a problem in|
|one country can sometimes adversely impact one or more countries instantaneously, even if they are fundamentally strong. |
|There is a growing realisation that the ability of countries to conduct business across national borders and the ability to cope |
|with the possible downside risks would depend, interalia, on the soundness of the financial system. This has consequently meant |
|the...