no. that ’ s why bill gates said what he said – “ banking is necessary, but banks are not ”. 20. how this happened? admittedly, it is the technology and the customer expectations which chunked away or which enabled chunking away the different elements of banking. will banks really cease to exist? 21. that ’ s a moot point. at least, as the pwc research report says “ while we are not looking at the end of banking, we are surely looking at the end of banking and banks as we currently know them ”. 22. the chunking away of banking from the banks have given enormous business and growth for these non - banks. with their specialization and focussed service rendering, they are able to offer that chosen service at greatest efficiency, speed and at very affordable cost to the consumers. this has stumbled the growth of banks today and has every potential to lead to de - growth and ultimately the decimation of banks in future. 23. as we know, unconventional policies are rampant in the world. first it was low interest ; then it was near zero or zero interest. people thought that zero is the lower bound and one cannot breach it. now the lower bound has been breached and negative interest has come on the scene. jurisdiction after jurisdiction is ushering in negative interest rate regime. is there any lower bound for negative interest? can banks survive if this trend persists? 24. another set of questions are about the justification for banks to exist. why the society should accord the privilege of banking to banks i. e. why should there be a licensing for undertaking banking activity? let us recall that the west no longer officially designate anybody as a bank ; they have only a depository institution or a credit institution. our fslrc recommended indian financial code also reflects similar thinking. the other day, shri mohandas pai asked me, given the way the non - banks do banking, what is the justification for the banks to impose a cost in the form of the net interest margin of 3 % on the society. in what way rendering banking services under one umbrella is relevant any longer? 25. yet another challenge for the banks ’ existence is the reaction by the society to the financial crisis – the consumer distrust in banks. remember the movement against wall street? the dodd - frank act? the liikanen and vickers reports? the ring fencing of wholesale and retail banking? faced with the challenge of dramatically decreased consumer trust in the post - crisis

trillion of agency mbs and about $ 175 billion of agency debt at the end of this month. the federal reserve ’ s purchases have had the effect of leaving the banking system highly liquid, with u. s. banks now holding more than $ 1. 1 trillion of reserves with federal reserve banks. a range of evidence suggests that these purchases and the associated creation of bank reserves have helped improve conditions in mortgage markets and other private credit markets and put downward pressure on longer - term private borrowing rates and spreads. at its meeting last week, the fomc maintained its target range for the federal funds rate at 0 to 1 / 4 percent and indicated that it continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. in due course, however, as the expansion matures, the federal reserve will need to begin to tighten monetary conditions to prevent the development of inflationary pressures. the federal reserve has a number of tools that will enable it to firm the stance of policy at the appropriate time. most importantly, in october 2008 the congress gave the federal reserve statutory authority to pay interest on balances that banks hold at the federal reserve banks. by increasing the interest rate on banks ’ reserves, the federal reserve will be able to put significant upward pressure on all short - term interest rates, as banks will not supply shortterm funds to the money markets at rates significantly below what they can earn by holding reserves at the federal reserve banks. actual and prospective increases in short - term interest rates will be reflected in turn in higher longer - term interest rates and in tighter financial conditions more generally. the federal reserve has also been developing a number of additional tools it will be able to use to reduce the large quantity of reserves currently held by the banking system. reducing the quantity of reserves will lower the net supply of funds to the money markets, which will improve the federal reserve ’ s control of financial conditions by leading to a tighter relationship between the interest rate paid on reserves and other short - term interest rates. notably, to build the capability to drain large quantities of reserves, the federal reserve has been working to expand its range of counterparties for reverse repurchase operations beyond the primary dealers and to develop the infrastructure necessary to use agency mbs as collateral in such transactions. 3 in this regard, the federal reserve recently announced primary dealers are broker - dealers that trade in