Adressing a risk managment seminar here he said that in a market with deregulated interest rates, substantial volatility and intense competition for aware and demanding customer segments, banks and financial institution need to build risk managment mechanism, he said.

According to him deregulated interest rates and a variety of investments avenues have exposed the banks to new risk. Balancing the maturities of their assets and liabilities and maintaining a healthy return in their credit/investments is critical for the banks to retain their comprative edge. This need to actively manage assets and liabilities will only grow with financial instruments being introduced in the market and increasing innovation inproduct design and delivery, noted Rajgopal.

Detailing the issues arising from loan rehabilitation activities, Rajgopal said, - it is time consuming, costly and subject to to high risk of loss and/or volatility, - loan recovery experise is a scare resource in times of economic adversity, -institutions which can swiftly and decisiuvely will generally outperform those which delay, -there is a high risk litigation or damage to reputation wity problem loan managment.

Efforts are on even now at the sectoral level to develop an effective way to reduce the level of non-performing assets. The banks have increased focus on government securities in the present situation of high returns thereon, thus exposing the banks to a different set of risk, he added.

Rajgopal further said that the pressure on margins and low industry credit off-take have forced banks and financial institutions to examine the cost of oerations. Some banks have responded by ratonalising the manpower and others are considering increasing theeffectiveness and efficiency of their distribution network.

The banks are focussing on preparing themselves for opportunities that future would bring by becoming more nimble, more flexible and efficient in product design and delivery.

Bundling a variety of products that suit a customer segment, structuring the product flexibly to enable better response from the market, leveraging on product portfolio already available are some of the stretegies adopted by the financial institutions, he said.