The ultimate aim of any modern corporate is growth with profit maximization. Growth is the first and foremost characteristic of nature and its products which include modern societies with all their industrial, agricultural and service sectors and above all the research organizations to cater to the needs of primary, secondary and tertiary sectors. Governed by the laws of the universe and nature, societies, markets and above all human life are in the constant churn of development in the realm of creativity and innovativeness.

According to RBI's roadmap for Basel II adoption by 31st March 2007, banks can use standardized approach for credit risk. This may affect negatively on small and medium enterprises (SMEs) sector because loan to SMEs whose credit ratings are not good require 150% risk weight. But, according to RBI's regulation about retail portfolio (Feb 2005), banks can classify loans to SMEs as retail loan and can assign risk weight of 75% if a prescribed criterion is fulfilled. Advanced approach to credit risk offered by Basel II also gives the concession of 25% risk weight for loans to small sector.

Basel II continues to attract the attention of regulators, banks as well as academicians worldwide and while some project it as the biggest fashion statement on bank risk management, some others interpret it as only the codification of the global best practices in managing risk in banks. As such Basel II no longer remains confined only to the capital charge on risk exposures, it has become the fait accompli on robust integrated risk management in banks. In this context, the fundamental difference between the role of the central bankers in the developed world and their counterparts in the Emerging Market Economies (EMEs) is that the latter have to put in place a robust integrated risk management system in their banks first to move over to Basel 2, while the former have to basically codify the practices followed by some of their best banks. Admittedly, the task is more challenging for the central bankers in the EMEs.

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