semi urban and rural areas. to mitigate this problem, since 2006, opening of new branches for any bank is approved by rbi only on condition that at least half of such new branches are opened in under - banked areas as notified by rbi. many banks now find that the branches in semi - urban and rural areas are also commercially viable. it is useful to note that the policy preferences of rbi in the banking sector, which are aimed to address issues of targeted allocation of credit and penetration of banking services have not adversely affected the improvements in accounting practices, reduction in nonperforming assets and improvements in profitability as well as capital adequacy. it is useful to note that the valuation of bank stocks, of both public and private sector, are improving while foreign banks gather a fast increasing proportion of their global profits from indian operations. beyond credit : financial inclusion in the reform process that commenced in 1992, the reform of financial sector was early in the cycle. the first stage of the process concentrated on elimination of financial repression which was followed by greater marketisation of financial sector and changes in regulatory regime, consistent with global standards. the process strengthened financial sector, improved efficiency, imparted stability and facilitated impressive growth, withstanding several global and domestic shocks. the next phase clearly was to ensure what may be termed as democratisation of financial sector. the process which was commenced two years ago aimed at ensuring hundred per cent financial inclusion. the process of financial inclusion consists of seeking each household and offering their inclusion in the banking system. the main features of the approach involve “ connecting ” people with the banking system and not just credit dispensation ; and using multiple channels such as civil service organisations, ngos, post offices, farmers ’ clubs, panchayats, mfis ( other than nbfcs ), etc. as business facilitators / correspondents to expand the outreach of banks. further, a decentralised approach is adopted which is state / region specific, and has close involvement and cooperation between the respective state governments and banks. information technology is critical to minimising transaction costs. the government ’ s on - going massive programme of rural employment and pension payments etc. can be implemented with minimal transaction costs by recourse to financial inclusion through i. t. several districts have already been covered under total financial inclusion and a process of evaluation and feedback is underway. rbi is encouraging and aiding the process. the importance of financial inclusion for emerging market economies ( emes

interest rates may also have impact on other benchmarks such as libor. a sharp rise in yields may entail an increase in cost of variable - rate debt contracted by the corporates. this, to some extent, could be offset if there is a depreciation of the relevant currency and consequent decline in the value of the existing debt contracted by corporates in that currency. indian corporates as also some of the public sector enterprises raise resources from the international capital markets. while a part of their external commercial borrowings is at variable interest rate, a part is at fixed interest rates. in order to avoid any serious impact of changes in the exchange rate on the balance sheet of the corporate sector, reserve bank has been advising banks to regularly monitor the unhedged position of the corporates and has also been exhorting corporates to hedge their foreign exchange exposures. thus, india's corporates could be affected by the deterioration in the financing conditions only to the extent they are not hedged either by foreign - currency cash flows in the normal course of business or through recourse to appropriate hedging products. corporates would, however, be affected to the extent interest rates firm up in the domestic market, depending on their exposure to debt relative to other liabilities. impact on the banking sector banks in india are dependent mainly on domestic deposits, predominantly at fixed rates, for their resource requirements. they would, therefore, be impacted significantly only if the adverse developments in the international capital markets are particularly severe. banks, in general, also do not hold stock of securities in foreign currency. banks in india have, thus, relatively small exposure to the foreign exchange market. their foreign currency borrowings are subject to the prudential limit of 25 per cent of their tier - i capital and they are also required to maintain capital against the net open position. foreign currency borrowings by the banks are permitted beyond this ceiling, which is linked to the net worth, exclusively for the purpose of export finance. like many other emerging market economies, credit extended by banks in india has increased sharply in recent times. credit growth, which was earlier seen largely in housing and retail loans, has now turned quite broad - based with agriculture and industry also joining to drive up the credit demand. the credit growth in some sectors, specially those related to assets which are experiencing price volatilities, is being monitored closely. banks are allowed to lend to resident exporters in foreign currency at internationally competitive