reach a comfortable level of inflation. the weak state of the economy, as well as the good kharif and rabi harvest, will generate disinflationary forces that will help, and we await data to see how these forces are playing out. no single data point or number will determine our next move. i think the market understands what we are trying to do. but we do need a more carefully spelled out monetary policy framework than we have currently. action on the framework will follow the submission of the dr. urjit patel committee report, which is expected to submit its report by end december 2013. second, we have already announced measures to free bank branching, and to incentivise foreign banks to incorporate domestically. going forward, we have to give our public sector banks, which are a national asset, the means to improve their competitiveness. many of them have made enormous strides in the last decade – for instance, the extent to which they have digitised their operations is extremely praiseworthy – but because competition in the banking sector is likely to increase in the next few years, they cannot rest on their laurels. in the coming months, we will discuss with stakeholders in public sector banks about what needs to be done to further improve their stability, efficiency and productivity. third, we need to enlist markets in the aid of banking. liquid markets will help banks offload risks they should not bear, such as interest rate or exchange risk. they will also allow banks to sell assets that they have no comparative advantage in holding, such as long term loans to completed infrastructure projects, which are better held by infrastructure funds, pension funds, and insurance companies. liquid markets will help promoters raise equity which is sorely needed in the indian economy to absorb the risks that banks otherwise end up absorbing. rather than seeing markets as being inimical to the development of the banking sector, we have to see them as complementary – of course, this requires you bankers to build on your risk management capabilities so that you can use markets effectively. in the coming weeks, we will roll out more recommendations of the gandhi committee report to improve the liquidity and depth of the g - sec market. we will then turn to money markets and corporate debt markets. we will introduce new variants of interest rate futures and products like inflation indexed certificates, and work to improve liquidity in derivative markets. fourth, we have to reach everyone, however remote or small, with financial services. financial inclusion does not just mean credit

have more skilled manufacturing jobs. 4. and finally, we need a better financial system, which will finance the needed infrastructure and the expansion of every producer ranging from the kirana shop owner to the industrialist even as it allows households to save safely with positive real returns, insure themselves against health emergencies or old age costs, and borrow at low cost to finance consumption. importantly, the financial system should not require constant subsidies to bail it out. five pillars of rbi's developmental measures in the rest of this talk, i want to focus on what we at the reserve bank are doing to improve the financial system. we plan to build the reserve bank ’ s developmental measures over the next few quarters on five pillars. these are : 1. clarifying and strengthening the monetary policy framework. 2. strengthening banking structure through new entry, branch expansion, encouraging new varieties of banks, and moving foreign banks into better regulated organisational forms. 3. broadening and deepening financial markets and increasing their liquidity and resilience so that they can help allocate and absorb the risks entailed in financing india ’ s growth. 4. expanding access to finance to small and medium enterprises, the unorganised sector, the poor, and remote and underserved areas of the country through technology, new business practices, and new organisational structures ; that is, we need financial inclusion. 5. improving the system ’ s ability to deal with corporate distress and financial institution distress by strengthening real and financial restructuring as well as debt recovery. let me elaborate on each of these measures a little. first, we are among the large countries with the highest consumer price inflation in the world, even though growth is weaker than we would like it to be. much of the inflation is concentrated in food and services. our households are turning to gold because they find financial investments unattractive. at the same time, many industrial corporations are complaining about high interest rates because they cannot pass through their higher costs into higher prices for their products. we can spend a long time debating the sources of this inflation. but ultimately, inflation comes from demand exceeding supply, and it can be curtailed only by bringing both in bis central bankers ’ speeches balance. we need to reduce demand somewhat without having serious adverse effects on investment and supply. this is a balancing act, which requires the reserve bank to act firmly so that the economy is disinflating, even while allowing the weak economy more time than one would normally allow for it to