the need for effective deposit insurance was exposed during the resolution of several local banks that failed during the late 1990s and early 2000s. indeed, the bank of uganda ( bou ) has recently been the subject of a parliamentary probe seeking final closure of the numerous issues and contested claims that arose out of the associated receivership and liquidation processes. notably, the depositors of those failed banks were fully compensated, for the most part, using taxpayers ’ funds as the government sought to preserve public confidence in the banking system. needless to say that such implicit deposit insurance by the government imposed an unanticipated financial burden on the limited fiscal space. page 4 of 8 seeking to foster financial sector soundness, several reforms were undertaken in the banking system. these reforms included but were not limited to : tightening banking laws and regulations designed to constrain undue bank risk - taking and inappropriate insider dealings ; upgrading bank supervision and examination systems ; providing liquidity through the central bank to prevent bank illiquidity problems from turning into insolvencies ; and intervening to resolve failing banks. of specific relevance was the introduction of a deposit insurance scheme that was initially operated within the bou. an effective deposit insurance system is expected to yield faster, smoother, and more predictable resolutions of failing banks, not least because it follows predetermined “ rules of the game, ” rather than being discretionary and ad hoc. and it stands to reason to say that a more rules - based deposit insurance scheme operates best when it is autonomous. therefore, in 2016 the financial institutions act 2004 was amended to provide for the establishment of an autonomous deposit protection fund of uganda, among other reforms. page 5 of 8 another vital reform, worth highlighting here, is the recent increase of the deposit insurance threshold to ush 10 million from only ush 3 million previously. the higher threshold is likely to enhance public confidence and encourage greater customer deposits, thereby expanding the funds available for financial intermediation by the banking sector. larger pools of deposits would reduce the cost of loanable funds for banks, spur credit expansion, and ultimately support faster economic growth. at this point, it is necessary to address any concerns about the safety of the deposits that exceed the insurance threshold of ush 10 million. the protection of large uninsured depositors of failing banks, will continue to take place through various forms including : a purchase and assumption transaction, in which all of the deposits ( insured and uninsured alike ) of the failing

grievances cell to handle customer complaints and the small finance banks will come under the purview of rbi ’ s banking ombudsman scheme, 2006. 30. we have received 72 applications and are in the final stages of determining who all can be granted licenses. at the cost of repetition, i want to emphasize here also that granting banking licenses is not a tick box exercise ; it needs to be based on the high regulatory comfort about the “ fit and proper ” position of those who will manage the bank. the small finance banks are also high leverage organisations, and we require highest degree of assurance about the entities with whom public moneys can be entrusted. therefore, licences shall be issued on a very selective basis only ; we will soon announce grant of licenses to the selected applicants. market development and customer protection 31. as regulators we often face the dilemma of market development or market innovations versus customer protection. we are still a developing and emerging market ; while in several respects we have reached international standards, there are still quite a sizable segments in the financial sector that needs development and innovations. financial inclusion is a case in point. new ideas need to be encouraged ; initial cost which will be typically high needs to be recovered ; initial period risks and failures need adequate return and compensation. on the other hand, these compulsions will militate against consumer protection. as regulators, we recognise this dilemma. we did face this dilemma in recent years in the cases of micro finance institutions, the atms, credit and debit cards, the electronic fund transfer services like the rtgs and neft and even the cash services. we were convinced about the need for expansion of these services and conveniences ; we understood the trade - offs between the charges for these services and the consumer interests. our approach has been a gradual move from facilitating entrenchment of such developments and innovations by ensuring competition and choices for consumers to a fairer treatment of consumers and fair charges. life in low interest rate regime 32. now, i would like to paint the scenario that will emerge in our country in the next few years and some preparations that all of us as savers should be undertaking. for a very long period, more specifically in our own living memory of the post - independence era, india had been going through high inflationary period ; of course, thankfully, we never had the hyper inflationary periods like in several african or south american countries ; but certainly, our experience of inflation was in high single digits to teens