Counter cyclical measures in respect of capital and provisioning were first taken on board in 2005 when risk weights and provisioning on certain segments were increased on account of rapid credit growth in these segments leading to concerns about potential impact of asset price bubbles and impact on credit quality. However, the important difference was that Indian approach entailed sector-specific prescriptions.
This section incorporates numerous concepts from the Checklist for Risk Management on Derivatives Transactions, which was compiled and issued in April 1995, and reflects new risk management techniques and lessons learned from some of the recent financial incidents. Fourth, with the development of EDP at financial institutions, more weight has been put on EDP in the section on business operations and EDP.