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In the background of the turbulence witnessed in the financial sector the world over, the RBI may do well to evolve a framework of regulatory standards, that could serve as yardsticks to assess the health of financial institutions.

The guidelines could include benchmark standards set for key financial ratios and efficiency parameters such as return on assets, return on equity, return on net worth, net interest margin, earnings per share, price to equity ratio, NPAs as percentage of gross loan portfolios, etc.

Such a benchmark framework may be evolved with the involvement of other financial sector regulators, including SEBI, National Housing Bank and the Insurance Regulatory Development Authority.

N. Vijayagopalan, Bangalore

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