y v reddy : issues in choosing between single and multiple regulators of financial system address by dr y v reddy, deputy governor of the reserve bank of india, at the public policy workshop, at icrier, new delhi on 22 may 2001. * * * respected chairman, dr. patel, dr. isher ahluwalia and distinguished participants. i am here in fulfillment of a promise made to mrs isher ahluwalia some time back to make a presentation at this prestigious institute. needless to say it is a privilege to be here ; and i am thankful to the organizers for giving me freedom to choose the subject of the day. my fascination for this subject is only about four yours old. dr. rangarajan, the then governor deputed me to attend the fourth central bank governors symposium in london on my way to the annual meeting of bank for international settlements at basle. the broader issue of financial regulation and the contemporary issue of single regulator had then just been decided upon in united kingdom. in view of recent interest in the subject in india, i thought that i should share my thoughts on the choice between single and multiple regulators for our financial system. it is a great personal honour to me that dr. i. g. patel is presiding over this session as his scholarship, statesmanship, sage counsel, and outstanding leadership are admired by all of us. i have divided this presentation into five parts. first, the institutional structure for regulation needs to be considered with an initial broad understanding of the rationale for regulation, regulatory coverage, policy frame and the operational aspects. second, the structural aspects of regulation are presented encompassing the reasons for recent interest in the subject, pros and cons of single versus multiple regulators, the international experience and the developing countries ’ perspective. third, the current status of the regulatory structure. fourth, the contours of the current debate on the subject. fifth part, the issues for consideration. it is argued that the historical context, the state of development of financial markets and the level of skills available should be considered in making a choice. it is also argued that apart from single and multiple regulators, hybrid arrangements can be explored to suit the requirements of our country. while change from the current status appears desirable, the issue is not only one of choosing an appropriate model, but also one of managing the process of change and sensitizing all participants to the changing circumstances. in any case, an ideal structure by itself does not guarantee optimal regulation, and in

s municipalities, a commission agent is the only way formal banking services are provided. 4 in addition, mobile phones have begun to be used as a financial services medium. even if they have not yet become a wide distribution channel, partly due to platform development and interconnection problems, their potential is enormous. with mobile phones, the use of which is widespread across all income brackets, individuals today can carry out various basic operations such as consulting savings balances and making payments to third parties. shared challenges on financial inclusion despite this progress, a lot remains to be done to incorporate those not served by the banks. given the fact that apparently many challenges to financial inclusion come from high costs and low profitability, the use of new technologies and the facilities brought by telecommunications will without a doubt continue to play a key role in augmenting the possibilities of banking penetration in mexico. beyond the factors that drive success is the need for all players to be actively involved in the endeavor of financial inclusion. the authorities should continue to promote the interconnection of services, competition in the banking industry, and transaction safety. in an important way, they should also strengthen the prudential and supervisory frameworks so that previously informal activities become incorporated in a way that safeguards the population ’ s wealth with due caution. the financial intermediaries, in turn, should keep participating actively in the development of these markets, creating new ways of servicing an ever wider and more heterogeneous public. see the key reasons for which an individual decides not to open a bank account in ibid, p. 22. the cnbv reports the data on coverage by commission http : / / portafoliodeinformacion. cnbv. gob. mx / bm1 / paginas / infoper. aspx agents at the municipal level bis central bankers ’ speeches in the final analysis, keeping up with the pace of society will continue to be essential to broadening the formal financial system. throughout the world, it has been clear that many market transformations have come from social initiatives or businesses with the imagination, creativity and technology to satisfy savings, lending and payment needs. for example, in many countries, innovations have included the creation of peer - to - peer platforms, which pinpoint matches between those who seek loans with savers who decide to lend. another method, crowdfunding, has become a popular way for firms seeking loans and previously analyzed by the platform to sell their shares on -