such as fintech and bigtechs, which are taking advantage of digital innovation. these developments have implications for financial stability in emerging market economies ( emes ) like india. it is indeed imperative that banks capitalise on these technological advances and the associated business models. regulators on their part also need to provide enabling frameworks for these endeavours by banks as well as the non - traditional players. the indian scenario 7. the pursuit of financial stability has always been a policy priority in india. the twin concerns of monetary and financial stability constitute the core objectives of the reserve bank. similar to the global case, india also responded to the crisis by introducing changes in the existing institutional architecture to further the cause of financial stability. recognising the various channels that could lead to systemic instability and the fact that different segments of financial systems are regulated by different regulators, the institutional mechanisms of the financial stability development council ( fsdc ), under the chairmanship of the finance minister, and the fsdc sub - committee, under the chairmanship of governor, reserve bank, have been fully functional. the biannual financial stability report ( fsr ), a report of fsdc sub - committee, analyses the current state of financial system, the extent of interconnectedness among its various segments and possible sources of vulnerabilities that could impact domestic financial stability. 8. the headwinds to financial stability could emanate from various sectors of the economy, namely, ( i ) the credit market ; ( ii ) financial markets ; ( iii ) external sector ; and ( iv ) payment system. it may emanate from some other sources as well. but today, i will focus on these four aspects. headwinds from banking sector 9. in india, the credit market is dominated by the banking sector which plays a key role in financial intermediation in the economy. soundness of the banking system may have a bearing on the financial stability through various channels – excessive credit growth ; maturity mismatches and liquidity issues ; high proportion of non - performing loans ; and overleveraging, among others. even if individual institutions are robust, the overall behaviour of the financial sector can pose a systemic risk. hence, monitoring the health of the banking sector is crucial for financial stability. 10. in recent years, as a result of efforts by both the reserve bank and the government, the overhang of stressed assets in the banking system has declined. going forward, the macro

robust regulatory structure. 25. however, new entrants into the financial services space, including fintech and bigtech firms are altering the universe of financial service providers. a range of new lending platforms, including p2p and marketplace lenders, have appeared in jurisdictions around the world. highlighting some of the related challenges and opportunities, the recent annual economic report of the bank for international settlements ( bis ) states that such firms can collect large amount of data at nearly zero costs, which can be used to better assess the riskiness of borrowers and could reduce the need for collateral to assure repayment. these new players have also made inroads in the provision of payment services, remittance services and crossborder payments. moreover, they have the potential to grow very quickly and become large and systemically important financial institutions, raising concerns over financial stability and consumer protection. 26. faced with such profound changes, the policy makers ’ dilemma is more than walking the middle path between innovation and regulation. the public policy approach here needs to be more comprehensive and holistic, taking into account issues such as financial regulation, competition policy and data privacy regulation. coordination among various authorities – such as financial regulators, competition authorities and data protection supervisors – becomes critical at this juncture. 27. the reserve bank ’ s vision - 2021 for payment and settlement systems in india visualises empowering every indian with access to a bouquet of e - payment options that is safe, secure, convenient, quick and affordable. the committee on deepening of digital payments under the chairmanship of shri nandan nilekani has suggested to increase the volume of digital payments by 10 times in the next three years which can be facilitated by initiatives such as removing transaction charges on digital payments, simplifying kyc processes, and reducing kyc costs for banks. the reserve bank is taking necessary action based on the committee ’ s recommendations. concluding observations 28. at the end, i would like to highlight the significance of consumer protection which is not only important from the point of view of access but also from a broader context of stakeholders ’ trust. the trust of the consumers that the services are fairly priced, the trust of the investors that the stakeholders are acting in their best collective interest, the trust of the regulators that the audited financial statements do represent a fair and reasonable assessment of the activities of a firm – all have intangible but substantial contribution to national savings and financial stability. post 5 / 6 bis central bankers'speeches lehman