"At present, the banks are required to classify assets into four categories following the Reserve Bank of India's asset classification norms. However, they should go for sharper divisions in accordance with the risk profiles of assets," Patil told bankers while making a presentation at the Indian Banks' Association global banking conference on Thursday.

At present, commercial banks classify their assets into standard, substandard, doubtful and loss assets. "Within the standard category, there are triple-A (AAA) rates as well as triple-B (BBB) rates borrowers and a triple-B company can any day slip into the C category. Banks should make sub-classification within the standard category," Patil said. He urged the bankers to quantify risks of individual borrowers and classify them on the basis ofthe risk perception instead of clubbing them all into one broad category.

According to Patil, banks should adopt a weighted average approach while arriving at the capital adequacy ratio after assigning different CAR to different category of assets. "The banks should take into account the market risk, credit risk and operational risk while calculating the weighted average of risks," he said.

The NSE managing director came down heavily on the RBI's norms for mark to market to banks' securities portfolio. Dubbing the methodology as `deceptive', Patil said that the concept of the mark to market in the Indian context is faulty as there is no depth in the debt market and certain securities are never traded in the market.

He also ridiculed the RBI directive of involving bank boards in risk management. "What does the board know about risk management? The top management of banks should educate the boards," he said.

He also came down heavily on banks' transfer policy and increasing unionisation of banks' staff.The agenda before banks should be tightening of internal control which is possible if banks come out of the shackles of unions, he said. He urged banks to recruit specialised staff to handle risk management and dump the age-old transfer policy which does not encourage specialisation in any field.

"You should not transfer an expert on risk management to a rural branch simply because he has spent four years in a metro. This practice has to be stopped and banks should encourage specialisation in the field of risk management," Patil said.