have to be compliant with international standards. what are the challenges in our achieving the stated goals? recently, i happened to read an interesting book entitled, “ jugaad ” ( naviradjou, jaideepprabhu and simone ahuja ). first, what is jugaad? according to authors, jugaad is a colloquial hindi word that means something like, an innovative fix, an improvised solution born out of ingenuity and cleverness. the authors point out that the biggest indian jugaad to communication is the “ missed call ” on the mobile phones. india perhaps leads the world in this! negative connotation to this jugaad notwithstanding, we need to think positively and appreciate that innovation or jugaad - in a positive way - is going to be critical for india - not only for competitive advantage, but also to ensure that our future development is sustainable and inclusive. the authors flag six principles of jugaad in emerging countries which is worth recounting to an audience like this : 1. seek opportunity in adversity 2. do more with less 3. think and act flexibly bis central bankers ’ speeches 4. keep it simple 5. include margin 6. follow your heart these six principles when viewed in the context of this conference can be interpreted to pose some fundamental issues. first, can the prepaid industry today proclaim that they have done all what could have been done? i am of the view that although the regulator has authorized the non banks to enter the payments sphere and the non - banks have largely chosen ppi, the results are not very heartening and encouraging. available data indicates that the growth of the issuance of ppis in india has and continues to be sluggish. the average issuance of ppis during the year averaged 48. 96 million, with a peak issuance of 57. 46 million in july 2011. and even amongst these numbers, it has come to our notice that a particular ppi issuer has issued ppis of re 1 / – each in large numbers! reflecting this growth pattern, the volume of transactions ( 2. 3 percent ) and value transacted ( 2. 5 percent ) with ppis as a percentage of total card transactions is also very marginal. second, has the regulator done what could be done? let me try and defend myself. rbi has always been in the forefront of building an enabling environment for the players of the payment industry. since

of capital flows to countries in 2009 with a strong growth outlook or appreciation expectations brought back pressures on the exchange rate and rising asset valuations, including equities ( chart 5 ). many emerging markets met these challenges with a mix of macroeconomic policies as well as macro - prudential and other capital flow management measures. let me now turn to the indian experience in managing the spillover from volatility in capital flows. indian experience we have a deficit in the current account of our balance of payments ( bop ). hence, we are dependent on global financial markets to finance our current account deficit ( cad ). the impact of capital flow volatility on our economy can best be captured in a snapshot by looking at the movement in our foreign exchange reserves and the exchange rate ( chart 6 ). lane, timothy ( 2012 ), “ financing commodities markets ”, remarks at the cfa society of calgary, calgary, alberta, 25 september 2012. bis central bankers ’ speeches we experienced a phase of high growth and low inflation prior to the crisis. financing the current account was not an issue for two reasons : first, the cad was small and second, capital inflows were far in excess of the absorptive capacity of the economy. hence, capital inflows resulted in both the appreciation of the rupee and accretion to foreign exchange reserves. in the context of intervention in the foreign exchange market, the issue of cost of sterilisation invariably comes up for discussion. but the issue is a complex one : should one look purely at the financial cost measured largely in terms of interest rate differential between foreign and domestic interest rates? should one look at the cost of non - intervention in terms of its implications for financial stability, which is of course difficult to quantify but perhaps easy to understand? in any case, the financial cost of sterilisation is in the nature of a quasi - fiscal cost : if it is borne by the central bank, profit transfer to the government reduces to that extent ; if it is directly borne by the government, it is reflected in the budget. in addition, if sterilisation is done through raising unremunerated cash reserve ratio ( crr ), the cost is borne by commercial banks, though they may benefit from easy liquidity. in its intervention operations, the reserve bank followed a cost sharing approach with the financial costs shared by the rbi, government and commercial banks. with the hindsight i could venture to say that the liquidity