, can compete shoulder to shoulder with the global banks to get a decent space in the global value chains. 8. size is essential, but efficiency is even more important. efficiency, however, is a much broader concept and requires several other factors to evolve and act along its side. the prerequisite will be use of technology. the quality and ingenuity of technology should match our aspirations of acquiring scale and diversion of business across the globe. the focus of use of technology should shift from ‘ transactions - based ’ to ‘ business - oriented ’. we have a pocket full of technological tools like big - data, artificial intelligence, machine learning to leverage upon, in order to be able to compete with the global players in reaping the benefits of ‘ creativity ’ looming large all over. 9. while introspecting on newer ideas to improve the health of banks and quality of banking, it is fundamental to reform the culture of governance and risk management systems. these two areas lend inherent strength to the business of banking and good amount of work has been done in this direction over the years. the rbi has issued a discussion paper on g ‘ overnance in commercial banks ’, for comments from various stakeholders. ideally, efficiency should be ownership - neutral. while it is natural that the capital - providers or investors would like to remain alive to the aspects of how exactly a bank is run, it is worthwhile to allow sufficient leeway to the board and management of a bank to run the affairs of a bank in a professional and autonomous manner. a decent distance between the owner and the professionally sound management and board would promote robustness of banking institutions. 10. there will be newer risks with newer business models. more so, when banks get bigger and more connected across diverse jurisdictions. high growth by virtue of newer business models can be achieved with clear understanding of one ’ s own strengths and weakness. remaining overly risk - averse may seem to be a measure of self - immunisation ; but will be self - defeating as it would affect the bottom lines adversely. risk propensity should be in alignment with the individual bank ’ s measured risk - appetite. the risk management system should be sophisticated enough to smell vulnerabilities brewing within the various businesses well in advance and should be dynamic enough to capture looming risks in sync with the changes in external environment and best practices. 11. one visible area of concern in the arena of risk management is the inability to manage the operational risk / s

allowed factoring transactions on ‘ with recourse ’ basis to be classified as eligible for priority sector by banks. further, the factoring transactions taking place through treds are also eligible for classification under priority sector. it is understood that many banks have their own vendor finance platforms akin to treds where they are undertaking factoring transactions on without recourse basis to msme and with recourse to the corporate. since two entities licensed under treds have become operational, it is expected that it will lead to better price discovery and more favorable rates for msmes. with added benefit of priority sector status, banks may actively consider undertaking ‘ without recourse ’ factoring transactions through treds. ( ii ) capacity building over the last two years, cab has taken a major initiative for capacity building of bankers for lending to msmes, popularly known as namcabs. i understand till now more than 5000 bankers have been trained. if we reflect back, namcabs has put emphasis on three categories of participants, i ) policy makers at the corporate office ii ) officers sitting in specialized msme branches and iii ) the trainers in the individual bank ’ s training establishments. however, cab cannot be expected to train the entire banking community. idea was to create a focus group within the bank which could act as the force multiplier. but if these trained resources are not gainfully employed, then it defeats the very purpose of the capacity building efforts being made by the college. ( iii ) cluster approach empirical evidence suggests that the msme lending is much more meaningful and strong if cluster approach is adopted. rather than financing stray units on standalone basis, if the banks are looking for business opportunity and furthering credit flow to units having strong repayment potential, then cluster approach becomes very much meaningful. i would suggest that not only should banks focus on financing in existing clusters, but also encourage promoting of such clusters. to do so, banks need to have a strong data base support and in - house research to identify the area, the activity and develop a delivery model. ( iv ) co - origination of loans the next point relating to msme and more so to micro units is something about which i have been speaking in various fora for quite some time. this is on co - origination of loans where some work is being done within the rbi. if one looks at the sector, which has received maximum credit from banks, it is the financial intermediation sector. this means banks have been