Although it is agreeable that India does require a National Security Strategy (NSS) for managing its security environment, both external and internal, from threats from aggressive neighbor countries, internal insurgencies, cyber security threats and other regional instabilities. An NSS would offer a structure for integrating the defense, intelligence and law enforcement branches of government for organized goal-directed counterterrorism activity. It would also enrich India’s diplomacy speaking points by understanding its security interests and approaches.

That is, the problems of an NSS are deep-rooted in the gigantic bureaucracy and coordination between agencies that oversee the process. However, the meeting of defense requirements with the economy results in funding complications. Political and electoral transferring and shifting may cause an interruption in security management. Also, central power and states are meant to create the appropriate cooperation because states manage specific affairs concerning internal security, like extremism or bordering in some areas. An NSS is feasible only when it can overcome these; this will be possible as its analytical and anticipatory capability to address emerging threats for India will be boosted up.

It indeed heavily impacted Indian banks’ capital adequacy and risk management after introducing Basel III norms. These new standards arising out of the global financial crisis of 2008 require higher capital requirements and improved liquidity standards in terms of building up resilience for the banking sector.

The above factor forced Indian banks to raise their capital adequacy ratios: there is an increasing equity or, more often, retained earnings, which can afford shocks much better now. Nevertheless, this has brought along certain challenges that cannot be managed by smaller banks in attracting sufficient capital.

The stricter norms for capital affected the lending practices, as the banks became more risk averse, particularly in the riskier sectors. To an extent, Basel III has permitted sustaining a higher proportion of Tier-1 capital and thus encouraged banks to be quality-specific rather than quantity-specific in lending, that is, secured loans instead of unsecured ones. Hence, though improving the quality of assets, credit growth has become slow-affecting the sectors highly bank-financed most.

On these lines, profitability has also been dealt with because larger capital is required to be deployed reduce leverage and hence the return on equity of banks. The increased focus on liquidity and risk management have also seen operational costs increase. Although, Basel III had the benign effect of stability in the Indian banking sector, it involved the cost of restricted profitability and a more conservative approach towards lending.

This has however been made a challenge by the factors of globalization, technological change and the increased flexibility presented by the digital currencies. Here’s how they influence it:

1. Globalization:

Globalization has also brought about the integration of economy across nation and made the world an economic unit. Coming as new factors beyond the control of central entities are foreign investments, differences in export/import, global economic crises, and others. Inflation or unemployment may have less to do with the central monetary policy since activities in the economy and those on international supply chains become subject to forces beyond interest rates, exchange rates, and the Central Bank’s influence on regulation.

2. Technological Change:

Thus, skill-biased technology change and productivity technologies in the labor markets have undergone some severe changes with shifting automation and AI.

This would pose problems to the normality of the institutional money stock instruments intended to govern employment and inflation rates. For instance, job loss in certain sectors through the use of technology will continue to persist even when interest rates that should spur employment have been set. More importantly, FinTech is proliferating the ability of public access to credits and banking services in a way that could limit the role of the central bank in the financial system.

3. Digital Currencies:

Digital currencies, in particular the decentralized type such as bitcoin, disrupts the traditional monetary systems as these are determined outside the realm of the central bank.

As such cryptocurrencies can now float around without necessarily requiring a central bank’s first-hand involvement, they can now threaten to decrease the power of monetary policy .

Central Bank Digital Currencies (CBDCs) is what the central banks currently view as an answer to the question for resuming the control and stability of a rapidly developing digital financial sector.

 On balance, therefore, integration, technological revolution, and crypto currencies pose challenges to the conduct of meaningful monetary policy warranting innovative adjustments by the central banks.