The government's action has been limited to periodically appeasing foreign institutional investors (FIIs) only because if they pull out, it will put the government in serious jeopardy. The domestic investor is hardly recognised, and is taken for granted. This is a perverted state of affairs. The result: The common investor has run away from the market place. And then the government goes to act in its own schizophrenic ways. Organises seminars in five star hotels on reviving the primary market. How hypocritical can you get?

Does not Sinha and Sebi realise that the domestic investor needs the stock market as badly as the market and the government need his savings. The pity isthat the nation has never realised the benefits that a `systems approach' can bestow on funding a nation's economic growth.

The government's approach at best has been ad hoc. You appease FIIs because it will hurt the government if they pull out. And domestic investors? Forget them, because they have no escape route.

It also proves that the government's interest in stock markets is peripheral. It acts only when its own shoe pinches, not otherwise. And what about Sebi? It could have at least presented a paper on the problems of the native investors, who have limited options in contrast to FIIs. It could have impressed upon the government the need to treat the domestic investor on par with the foreign participants. I have not heard of any work done in this direction from Sebi. The markets regulator has clearly failed to address one of the core issues.

Back to the government. Why is the buyback scheme taking so long to be put through? Have the markets not already been pushed to the precipice? What is thegovernment waiting for?

So my dear investor, face up to it. You need to survive on your own and with an indifferent Sebi and government.

The news flow during the week has not been good. CMIE has downgraded its expectation of GDP growth and business confidence is at a new low. In any case, you already had an inkling to the shape of things to come. Now you have no choice but to hold on to your last straw -- the degree of turmoil that afflicts the financial markets the world over. Six months down the line the dust would have started settling and you will see patterns of equity flows crystallising.

In the meanwhile, you can only take your risks, hoping that the market bottom will not give way. The markets are stabilising right now, after the UTI scare, despite FIIs' continued sales. We are entering a new phase, which needs to be watched carefully. What has started as a trickle can turn into a flood if the foreign investors do not see the government facing up to its task. We are yet to see the benefit ofSinha's enhanced public spending.

And now to the fears on the front of the financial system. The RBI's reported move to set up a departmental group to go deeper into the non-performing assets (NPA) issue at banks will be welcomed by many. The financial sector stocks are reeling under mammoth misgivings and fear that the real NPA's are much higher than those declared. An underestimation of NPA to the tune of Rs 3,800 crore had been reported earlier. Investors might as well think over this. Out of the Rs 45,000 crore, Rs 35,000 crore is claimed to be historical and the accretions in the last five years have been lower. An interim report from RBI to the public would help.

In New Zealand, the reporting system for banks is so transparent that one does not need to put faith only on the report of the central bank. The RBI may as well take a broader framework for investigation. India must move further towards international banking standards. We have already taken some steps towards the standards developed byGoldstein. The government interference in the banking system is at a minimal level already. In fact, Rangarajan carried the reform into the political arena by putting a limit to central government's borrowing. A further progression into putting a constitutional limit on the government's borrowing is at the mercy of the political system.

It is good to have the deposit insurance in place, but that should not help in creating an environment for imprudent or immoral bank lending. The moral issue is real and needs to be tackled. It is not just a case of NPA provisioning or underdisclosure.

The answer could take in more reliance on market discipline, which can come with better disclosures, more private ownership of banks, and more transparency. Right now, the central bank relies more on rigorous control, and not on market discipline model.

RBI controls can be only as good as the audit industry, its professionalism and integrity. I know of cases where inconvenient auditors have been shifted. Let us not forgetthat the top brass circuit in banking is a closed club. Club members protect each other. RBI needs to look closer here, and develop more transparent reporting systems for the public.

It is no secret that the major share of lending from the banking system is to a handful of industrial groups. Now that these industrial groups are facing major business risks because of the commodity nature of their business, it becomes even more urgent to look deeper into the risk assessment methods adopted by banks in the past while lending to these groups.

RBI also needs to keep in view the changing nature of the banking business while reframing its control mechanism. For some time now, we have been moving to and fro from traditional to seamless banking. RBI must look into the provision for subordinated debts which can provide cover for the increasing risks that banks will take when they enter newer vistas of banking, like activities across products and possibly derivatives.