in a position to not merely avail the offered services, 2 / 5 bis central bankers'speeches but are also capable of demanding preferred products and services suitable to their needs / choices. 14. the mudra is a case in point. while such a massive push would have lifted many beneficiaries out of poverty, there has been some concern at the growing level of nonperforming assets among these borrowers. banks need to focus on repayment capacity at the appraisal stage and monitor the loans through their life cycle much more closely. 15. the role and importance of the microfinance sector in our economy has also been steadily growing. according to the bharat microfinance report 2019 prepared by sa - dhan, mfis operate in 29 states, 5 union territories and 570 districts in india. the mfis are also expanding into newer territories for reducing their concentration risk. 16. tailored products for providing credit to those without a credit score, entrepreneurial and consumption credit, handholding, financial literacy, social occasion credits and insurance ( life and non - life ), are all waiting to be tapped in scale and size. limited forays have been made but are yet to achieve their full potential. 17. the rbi defines financial inclusion as the “ process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular, at an affordable cost in a fair and transparent manner by regulated, mainstream institutional players ”. the national strategy for financial inclusion ( nsfi ) 2019 – 24 has been framed by us. it gives the vision to make financial services available, accessible, and affordable to all citizens in a safe and transparent manner to support inclusive and resilient multi - stakeholder led growth. potential of microfinance 18. a major demographic change is taking place in our country with a huge and growing working population. there is a big chunk aspiring to grow into the middle class with the support of institutional credit. therefore, microfinance can play a big role in meeting their requirements and fulfilling their goals. 19. the credit needs of low - income groups range from emergency loans, consumption loans, business loans, working capital loans, housing, etc. in addition to credit, poor households would benefit from a combination of financial services, including savings, remittances, loans, microinsurance, micro - pensions, and the like. 20. in today ’ s world

regulatory, supervisory, and technological framework on par with international best practices enables strengthening of the domestic banking system, which would help in fortifying it against the risks that might arise out of globalisation. in india, we had strengthened the banking sector to face the pressures that may arise out of globalisation by adopting the banking sector reforms in a calibrated manner, which followed the twin governing principles of non - disruptive progress and consultative process. global challenges in banking 4. recently i was afforded an opportunity to speak on the challenges faced by the indian banking industry. to recapitulate, i had identified a few broad challenges faced by the indian banks in the following areas, viz., enhancement of customer service ; application of technology ; implementation of basel ii ; improvement of risk management systems ; implementation of new accounting standards ; enhancement of transparency & disclosures ; and compliance with kyc aspects. if we were to identify a few global challenges which banks face today, i am sure we would cover some common ground. an overview of the global challenges would include the following : basel ii implementation ; enhancing dr. y. v. reddy on banking sector reforms in india an overview at the institute of bankers of pakistan, karachi, pakistan, may 18, 2005. corporate governance ; alignment of regulatory and accounting requirements ; outsourcing risks ; and application of advanced technology. i propose to cover these aspects now. basel ii implementation 5. basel ii implementation is widely acknowledged as a significant challenge faced by both banks and the regulators internationally. it is true that basel ii implementation may be seen as a compliance challenge. while it may be so for some banks, i would venture to mention that basel ii implementation has another dimension which offers considerable opportunities to banks. i would like to highlight two opportunities that are offered to banks, viz., refinement of risk management systems ; and improvement in capital efficiency. 6. comprehensive risk management : under basel i banks were focused on credit and market risks. basel ii has brought into focus a larger number of risks requiring banks to focus on a larger canvas. besides the increase in the number of risks, banks are now beginning to focus on their inter - linkages with a view to achieve a more comprehensive risk management framework. basel ii implementation, therefore, is being increasingly seen as a medium through which banks constantly endeavour to upgrade the risk management systems to address the changing environment. further, in the initial stages, banks were managing each risk in isolation. it is no longer adequate to manage each