of india ’ s imports, as well as a slowdown in exports reflecting falling global demands. the current account deficit ( cad ) significantly widened during fy 2012 – 13 to touch the high of 4 % of gdp. the widening of cad in the backdrop of large decline in capital flows exerted severe downward pressure on rupee with consequent volatility. 3. in this context, it has to be appreciated that the volatility regime has undergone a significant shift and volatility in most of the asset classes as well as segments of financial markets has risen significantly since the onset of the global financial crisis in august 2007. the forex, equity, bond, and commodity markets have been extremely volatile during the period as global economic outlook remains “ unusually uncertain ” making it difficult for economic agents to make optimal and informed decisions. in the foreign exchange market, the direction of rupee ’ s movement has remained largely in sync with that of several emerging market currencies and more so with some of the major currencies but the magnitude of depreciation has been far more pronounced. bis central bankers ’ speeches 4. the so called “ new normal ” in the dynamics of inr - usd exchange rate also reflects greater influence of the global financial markets on the domestic foreign exchange market mainly due to india ’ s growing trade and financial integration with the rest of the world. india ’ s two way trade ( merchandize exports plus imports ), as a proportion of gdp, was 40. 7 per cent in 2008 – 09, the crisis year, up from 19. 6 per cent in 1998 – 99. the ratio of total external transactions ( gross current account flows plus gross capital account flows ) to gdp – an indicator of both trade and financial integration – was 112 per cent in 2008 – 09 up from 44 per cent in 1998 – 99. 5. there is another fundamental aspect that we cannot lose sight of. indian rupee has to adjust its value vis - a - vis other major foreign currencies to reflect inflation and growth differentials. in a market ruled by multiplicity of pressures, it is too optimistic to expect this adjustment to always happen in a smooth and secular manner spread across the time horizon. the experience of the recent past should carry an important and valuable lesson for all of us. any stability over an extended period of time could be a harbinger of volatility. if so, too much stability, instead of breeding complacency among corporates

fair trade practices " and " reasonable charges " ). regulators seem to be aware of the need to consciously connect the common person with bank services and equip him to manage the new reality of transaction - based but multifaceted banking. regulators all over the world have recognised some market failures in savings and credit markets and that banks ’ sophisticated customer - segmentation strategy has unintended consequences. thus, globally, financial inclusion is now a priority. initiatives range from the financial inclusion task force in the uk, which has noted that better customer - segmentation technology has led to certain sections of the population being financially excluded, to the community reinvestment act in the us, which imposes an affirmative and continuing obligation on banks to serve the credit and banking needs of all the communities in which they are chartered, to the initiatives of the indian government and the reserve bank. regulatory sea change banks are special. they have special privileges and unique obligations. they are licensed to take uncollateralised deposits from the public but have a high degree of leverage. their services are necessary. however, recent developments indicate a rebalancing of the focus of regulators and the awareness of bank customers. the regulators ’ thrust, of late, on financial inclusion, financial education, credit counselling, fair trade practices, reasonable charges and avoidance of unequal contracts is the right way forward to ensure an efficient, inclusive and equitable banking system.