, move into new markets, and support the best firms. now the need is to reduce the fragmentation that prevails in the system of cooperative and mutual banks, allowing for forms of integration that preserve these institutions ’ local roots and capitalize on individual banks ’ membership of banking groups. the solutions must be guided by the essential aim of enabling these banks too to turn readily to the market in order to raise capital, as well as by the purpose of improving the quality of their management. the cooperative banking systems of other european countries are much less fragmented than the italian system. the prevailing models centre on banking groups, in which the parent company exercises functions of direction and oversight over the banks in the group and, where necessary, can recapitalize them by recourse to the capital market. this model does not denature the cooperative form of the individual banks but allows them to maintain their characteristic mutuality and their community roots. integration of the system of cooperative credit is in the interest of the cooperative banks themselves, to ensure that cooperative and mutual banks can continue to operate independently in an environment requiring rapid provision for the needs for recapitalization and efficient management, and in the light of the narrower margins for intervention at troubled intermediaries. bis central bankers ’ speeches 4. conclusion in recent months the european central bank, in keeping with its mandate, has dealt effectively and flexibly with the pressures towards the fragmentation of the european markets and with the emerging threat of deflation, preserving the stability of the euro area. now this kind of flexibility, without prejudice to the rules we have instituted, is necessary at national and at european level in order to wed the objective of soundness of banks with the needs of economic recovery. where market failures occur, public intervention cannot be ruled out a priori. in their own interest the banks, despite the transition to the new set of european and global regulations and the likely gradual diminution of their role to the advantage of the capital markets, must enhance their capacity to provide financial support to the real economy. i have mentioned the priorities of the current phase : regaining efficiency, managing credit risk and strengthening governance. mergers can help in attaining these objectives. the financial system cannot solve such problems of the real economy as poor competitiveness and low productivity, on which i have not dwelt today. but it does have an indirect role to play in facilitating the transformation and growth of firms. banks can play this role while accompanying the development of the capital market and

to seamlessly integrate whatever technology they choose, with their cbs architecture. we have advised banks to adopt innovative business models and delivery channels to expand their fi efforts. there is a need for banks to develop new products and design new delivery models that are customized to the unique needs of the financially excluded population, both in the rural and urban areas. considering that financial literacy is an important adjunct for promoting financial inclusion, consumer protection and ultimately financial stability, rbi has adopted an integrated approach wherein efforts towards financial inclusion and financial literacy would go hand in hand. besides the various initiatives taken by rbi individually to encourage financial literacy, a national strategy for financial education ( nsfe ) has also been finalized under the aegis of the financial stability and development council ( fsdc ) to co - ordinate efforts of various stakeholders involved in this process. the reserve bank has been playing a supportive role in fi by creating a conducive regulatory environment and providing institutional support to banks in their fi efforts. importantly, we have provided banks the freedom and the space to determine their own strategies for rolling out fi and have encouraged them to identify their own goals and targets through their respective financial inclusion plans. robust institutional mechanism 11. our strength lies in the fact that we have created a robust institutional mechanism to support the roll out of banking services across the country. this was essential considering the enormity of the task in terms of the number of excluded people and the geographical size of the country. bis central bankers ’ speeches india is one country where the fsdc has a specific mandate for financial inclusion and financial literacy. there is a separate technical group on financial inclusion and financial literacy under the aegis of fsdc with representation from all the financial sector regulators. in order to spearhead efforts towards greater financial inclusion, rbi has constituted a financial inclusion advisory committee ( fiac ) under the chairmanship of a deputy governor from rbi. the fiac has few directors from the central board of rbi and experts drawn from ngo sector / other civil society representatives, etc. as members. the collective expertise and experience of the members is expected to be leveraged to explore issues such as developing viable and sustainable banking services delivery models focusing on accessible and affordable financial services, developing products and processes for rural as well as urban unbanked consumers. at the state level, we have state level bankers committees ( slbc ) in all the states. going further down, we have lead district managers in all the 659 districts, with recent inclusion of