and development council ( fsdc ) which is headed by the finance minister. under the aegis of the fsdc a sub - group of fsdc headed by the governor, rbi and within that a technical group, headed by deputy governor, dr k. c. chakrabarty, exclusively mandated for financial inclusion and financial literacy. in order to gauge the performance of banks and to continuously review the various models adopted under fi, rbi has constituted a financial inclusion advisory committee ( fiac ), headed by a deputy governor, dr k. c. chakrabarty. xii. road ahead extending the frontiers of the formal financial system xiii. for growth to be truly inclusive requires broadening and deepening the reach of banking. a wider distribution and access of financial services helps both consumers and producers increase welfare and productivity. such access is especially powerful for the poor as it provides them opportunities to build savings, make investments, avail credit and more important, insure themselves against income shocks and emergencies. as the real economy is dynamic, it is imperative that the banking system is flexible and competitive to cope with multiple objectives and demands made on it by various constituents of the economy. to address the issues of urban poverty we have brought the metropolitan urban areas like mumbai under the planning and review mechanism of the lead bank scheme now to outline the way forward for meeting our possible dream of financial inclusion 5. new bank licenses to ensure that the banking system grows in size and sophistication to meet the needs of a modern economy and for improving access to banking bis central bankers ’ speeches services, we are in the process of evaluation of new bank license applications they are expected to go beyond simply beefing up infrastructure like handheld devices, smart cards, better vendors and service providers, etc necessary to scale up the fi activities. these new banks are expected to bring new technology innovative models bring in new business and delivery models which would speed up the roll out of financial services to remote areas. financial inclusion will work on the acta model accounts, cash in cash out, transactions and adjacencies which will help to build a revenue stream. 6. business and delivery model – there are many challenges being faced while implementing financial inclusion. of 2, 68000 banking outlets nearly 221000 are bc ie nearly 82 % percent. sustainability and scalability of the bc model is essential. more and more innovative products will have to be introduced which would benefit both banks as well as the rural people and at the same time

at different levels. first, at the level of legislative framework, several suggestions have been made to ensure appropriate autonomy and many of them are under consideration. in particular, proposed fiscal responsibility and budget management bill and other amendments to reserve bank of india act would cover significant ground. several other suggestions relating to legal framework, as recommended by the advisory groups are yet to be taken up. second, at the policy level, there are three important constraints on the operational autonomy even within the existing legal framework. one, the continued fiscal dominance, including large temporary mismatches between receipts and expenditures of government warranting large involuntary financing of credit needs of government by the rbi. two, the predominance of publicly owned financial intermediaries and non - financial public enterprises, which has created a blurring of the demarcation between funding of and by government vis - a - vis public sector as a whole. three, the relatively underdeveloped state of financial markets partly due to legal and institutional constraints, which blunts the effectiveness of instruments of monetary policy. these issues need to be resolved to enhance genuine autonomy. third, at the operational and procedural level, there is a problem of “ old habits die hard ”. in a deregulated environment, there is considerable scope to reduce micro - management issues in the relations between the government and the rbi. at the level of degree of transparency, there is a temptation to continue, what has been termed as the “ joint - family approach ” ; which ignores basic tenets of accounting principles in regard to transactions between rbi and government. some critical elements for progress in reform in spite of difficulties in prioritizing the elements relevant for reform, an attempt is made to mention some elements which present themselves as critical in the light of experience gained so far. first, as elaborated in governor jalan ’ s recent statements on monetary and credit policy, several legislative measures are needed to enable further progress. these relate in particular, to ownership, regulatory focus, development of financial markets, and bankruptcy procedures. some of the serious shortcomings in the anticipated benefits of reform such as in credit delivery do need changes in legal and incentive systems. in particular, there is need to focus on reduction of transaction costs in economic activity, and enhancing economic incentives. severe penalties in law, including criminal proceedings, may not be substitutes for increasing enforceability ( i. e., probability of being caught, prosecuted, and punished adequately and in a timely fashion ). in regard to institutions, there