in regard to households. by its very nature, the informal sectors in different countries and in different communities are highly varied and deeply rooted in local conditions. so, should the focus be on learning from other countries ’ experiences, as considered useful by individual countries? fifth, is there merit in focusing on financial services and products, other than credit, inasmuch as credit involves issues of risks and leverage, much more than other banking products do? in other words, what should be the relative emphasis on different components of financial inclusion such as remittances, deposit - taking, consumption - smoothing, vis - a - vis financial products such as insurance? the relative emphasis may, of course, be countryspecific. sixth, a study by the imf indicates that too much emphasis on credit could adversely affect stability. easier credit delivery as part of a policy of financial inclusion may lead to the excess indebtedness of poor households, as experience has shown. if the emphasis is on credit, which institution will bear the risks involved? should the central bank assess the risks, if any, in the respective country ’ s financial inclusion programme and, in particular, who would bear the risks? would it be the banking system or the central bank or government? seventh, experience in india shows that institutions such as local area banks that address exclusively one area or one segment of the population or one type of activity may not be viable unless the regulatory environment is softer than that of their competitors. at the same time, soft regulation provides an opportunity for arbitrage. smaller institutions with limited expertise may find it difficult to deliver financial inclusion. at the same time, there are very few mechanisms available to ensure that larger conglomerates will find it profitable to adopt bis central bankers ’ speeches this programme. in other words, what are the limitations on instruments available to the central bank to implement financial inclusion programmes? eighth, what would be the role of regional or local government in the financial inclusion? how does a central bank co - opt such local governments? my experience suggests that local governments, especially in large economies, are better able than national governments to reach poorer sections of the population. ninth, do we recognise that the major issue is not one of inclusion or exclusion, but huge inequalities in terms of inclusion? a low - income person has to pay disproportionately higher fees for any financial service than a high - income person does. this is common to both advanced and emerging economies.

. so, i wanted to project the reserve bank as an institution concerned with the common people and not just financial markets and financial institutions. keeping in view the need for continuity with change as appropriate to evolving circumstances, we in the rbi pursued five broad policy directions. first, reforms in monetary management consistent with global developments ; second, alignment of bank regulation with global standards ; third, improving legal and institutional infrastructure to enable a modern financial system, in particular in the payments system ; fourth, harmonising as far as possible, developmental objectives with those of stability in consultation with government, and ; fifth, exploring ways in which the financial sector could better serve ordinary people. i emphasised the fifth aspect, that finance should serve ordinary people, as opposed to making the assumption that the development of the financial sector by itself will contribute to economic development and welfare. some initiatives, particularly those relating to financial inclusion in india since 2003, reflect this orientation towards the common people. financial inclusion, thus, was not designed as a programme in isolation, but as a part of the overall strategy in bis central bankers ’ speeches regard to the role of the central bank, as warranted by the indian context of inadequate access to essential financial services. i was acutely aware, having been a deputy governor for six years, that the needs of the common person were not served well enough by the financial sector, despite all the investment, innovation and strengthening of existing institutions in the financial system, particularly banks. so, while pursuing the reform agenda already set, and in parallel, i put the focus on serving the needs of ordinary people in their interactions with the banking system. in doing this, i realised that our efforts were addressed to meeting the needs of those who already had links to banks. what about the rest, who actually were far more in number than those with links to banks? so, the reform agenda provided for improvements in the way that the financial sector served ordinary people better and ensuring that it would reach out to all. my assessment of the common person ’ s requirements at that time was as follows : what do ordinary people in india, at this juncture want most from us, the central bank? first and foremost, a safe place to keep their cash especially for poor women who have to keep their earnings out of the reach of their drunken husbands. second, mechanisms for consumption - smoothing since 90 % of the population is employed in the unorganised sector with seasonal or uncertain income flows. third, remittances to families