Reserve Bank of India governor Bimal Jalan told the ministerial level policy-setting interim committee of the IMF that the new facility would be different as it would not be replenished once used while relieving IMF of pressures in finding adequate funds at crisis time.

"Many commentators on international financial crisis continue to recognize the need for an international lender-of-last-resort as a lasting solution to any financial crisis. Given the fund's present resources, it would be unable to play such a role," Jalan said. One possibility could be to amend the articles to allow the fund to issue SDR's to itself for use in lender-of-last- resort operations, subject to a pre-determined culmulative limit and other appropriate safeguards, Jalan said, adding SDR's thus created would be extinguished on repurchaseby the borrowing country.

There would also be no permanent increase in unconditional liquidity and the temporary additional liquidity could be activated when specific operations are mounted to cope with financial crises that were experienced recently, he said.

Jalan said currently India with a six per cent growth rate was one of the fastest growing economy in the world. Jalan also called for a consensus on the issue of reforms in the World Bank and IMF.

He also called for observing "certain minimum universally accepted standards in areas relevant to the maintenance of stability in the international monetary policies, including increased transparency in formulation and implementation of monetary and financial policies and improvements in the dissemination of relevant facts."

While fully supportive of minimum universally acepted data standards, Jalan said that the approach should be one that was "voluntary and gradual" and not "a big bang."

Jalan said this was necessary to ensure that theseinternational standards do not degenerate into categorizing countries as performers and nonperformers. He welcomed the IMF's background paper favouring orderly liberalization on capital account, recognizing that any road map should be based on ground realities.

"Furthermore," said Jalan, the path and speed at which countries will traverse across this path will depend to some extent on safeguards that a new international financial architecture will provide. The fund will necessarily also have to distinguish operationally between investment guidelines for foreign capital and capital account transactions. Because of these considerations, he said, extending the fund's jurisdiction over capital movements needs to be examined further and appropriately defined.

Jalan called for a cooperative international effort to review existing prudential standards, including in the leading industrial countries. "In particular," he said, "we need urgently to reexamine norms that could have incidental effect of encouragingshort-term flows to developing countries by ascribing lower risk weights to short tenor inter-bank loans, which encourages potential volatility of flows to these countries."

He also called for a broader mechanism to regulate "volatile private capital flows which, in large part, emanate from the inadequately regulated international operations of hedge funds and institutions operating from offshore banking centres. Since these types of institutions are able to leverage almost without limit at present, it is imperative that strict guidelines are evolved as a matter of urgency."

Jalan warned against complacency about the international financial situation. He said that although the likelihood of a global financial meltdown may have receded for the time being and there are some tentative indications that the worst may be over for the east asian crisis economies.

There are continuing stresses on account of the difficulties in Brazil, repercussions of the Russian economic problem, the continuing recession inJapan and the first signs of a slowdown in some european economies.