k c chakrabarty : the first mile walk into financial inclusion – thinking differently address by dr k c chakrabarty, deputy governor of the reserve bank of india, at the inaugural session of the financial inclusion conference 2012 “ the first mile walk into the financial system ”, organized by ficci and sa - dhan, new delhi, 7 august 2012. * * * assistance provided by smt. sushma vij and shri bipin nair in preparation of this address is gratefully acknowledged. mrs. naina lal kidwai, vice president, ficci and country head, hsbc india ; dr. amiya sharma, chair, sa - dhan ; mr. mathew titus, executive director, sa - dhan, delegates to this financial inclusion conference organized by ficci and sa - dhan, ladies and gentlemen. i am pleased to be here with you all for the financial inclusion conference 2012 that is being organized jointly by sa - dhan and ficci. the theme this year “ the first mile walk into financial inclusion ” is both innovative in its concept and significant in its new approach to furthering financial inclusion. i was told that the objective of the conference is to deliberate upon the issues that the customer faces in his first walk to the financial system. clearly, this is a customer centric approach and i congratulate the organizers for coming up with the idea. we are changing our thinking perspective from last mile ( service provider perspective ) to first mile ( customer perspective ). this change in thinking needs to be reflected in our actions also. financial inclusion efforts are not new ; both the government and the reserve bank have been pursuing this goal over the last several decades through building the rural cooperative structure in the 1950s, the social contract with banks in the 1960s and the expansion of bank branch networks in the 1970s and 1980s. these initiatives have paid off in terms of a network of branches across the country. yet, the extent of financial exclusion has been staggering. out of the 600, 000 habitations in the country, only about 30, 000 had a commercial bank branch. just about 40 per cent of the population across the country had bank accounts. the proportion of people having any kind of life insurance cover was as low as 10 per cent and proportion having non - life insurance was an abysmally low 0. 6 per cent. people having debit cards comprise only 13 per cent and those having credit cards only a marginal 2 per cent. the national sample survey

sarb. rather, they are focused on the contribution that particular individuals can make to the monetary policy decision - making process. but within these constraints, we also have to be mindful of the gender composition of the mpc, which is currently all male. this explains the absence of a full complement as provided for in the terms of reference, and it is something that we are working hard at to rectify. every monetary policy decision is an outcome of in - depth discussion and debate. even a'no change'decision is a policy decision. i should also note that the monetary policy decision is not a one - off event ; it is a continuous process which culminates in the mpc meeting where decisions are finally taken. we are constantly talking to each other, discussing what we see and how we interpret what we see. these discussions are not only amongst mpc members, but also with other staff members in the sarb who keep us updated about developments. we also interact with analysts outside the sarb, and we hear what they are thinking as well. a few days before each meeting we receive further documentation prepared by various units in the sarb, so by the time we have the mpc meeting, we are well prepared! mpc meetings last three days. the first day of the mpc meeting is devoted to discussions about global and domestic economic and financial market developments. this part of the meeting is attended by the mpc as well as about 55 other staff members. each presentation is followed by a discussion, where we interrogate the presenters and their colleagues. all attendees are invited to contribute to this discussion. at this point, however, there is no discussion of the policy stance. the following morning is devoted to a discussion of the forecast. these deliberations are attended by some members of the modelling team as well as about eight other senior officials, apart from the mpc members. the outputs of two of the main models are presented and discussed. page 6 of 10 given the centrality of the forecast, it is important to say something about the role of the forecast in the monetary policy decision - making process. monetary policy acts with a lag. according to our models, the full impact of a change in interest rates could take between 12 and 18 months to fully work its way through the economy to impact on gdp1 and inflation. for this reason, monetary policy decisions need to be based on the expected path of inflation and not on current inflation, which is a function