for the first time to boost the provision of houses to weaker sections and low income groups. 26. as a stated policy, bank loans for on - lending by nbfcs, except mfis, are not permitted as priority sector in the pre - revised and revised priority sector guidelines. since hfcs are essentially nbfcs, it is not logical to treat bank loans to hfcs for on - lending, as priority sector. further, banks being financial intermediaries, need to lend directly instead of relying on nbfcs / hfcs for providing credit. investments by banks in securitized assets and outright purchases 27. purchases / investments in securitized assets are an important avenue for meeting priority sector requirements for banks without significant branch presence. this is also critical for banks which do not have the expertise to originate small value loans. such banks can rely on the expertise of other intermediaries, who can originate the loans, which can then be taken over into the bank ’ s books through securitization. i would only like to advise that such transactions should not be done merely to tide over the regulatory requirement at year - ends. 28. banks are allowed to continue to classify their investments in securitised assets and outright purchases, where the underlying assets qualify for psl status, under respective categories of psl, provided they follow the rbi guidelines on securitisation and outright purchases. pricing for the ultimate beneficiary has been capped at base rate plus 8 %. here we have slightly differed from the nair committee recommendations, which had linked it to bank ’ s lending rate plus 6 %. we felt that linking it to base rate would ensure greater transparency in pricing and ease of monitoring. the ceiling on pricing, in contrast to the general freedom given to banks in pricing loans, is because free market still does not exist for the poor and hence, pricing is prone to distortions. the nair committee ’ s recommendation to restrict the bank loans for on - lending, buy - outs and securitization to a maximum of 5 % of anbc is not accepted. this is to allow banks to build up psl portfolio through the route of outright purchase / investments in securitised assets. investments / purchase / assignment transactions undertaken by banks with nbfcs, where the underlying assets are loans against gold jewellery 29. in terms of the pre - revised guidelines on priority sector, investments made by banks in securitized assets originated by n

have to be compliant with international standards. what are the challenges in our achieving the stated goals? recently, i happened to read an interesting book entitled, “ jugaad ” ( naviradjou, jaideepprabhu and simone ahuja ). first, what is jugaad? according to authors, jugaad is a colloquial hindi word that means something like, an innovative fix, an improvised solution born out of ingenuity and cleverness. the authors point out that the biggest indian jugaad to communication is the “ missed call ” on the mobile phones. india perhaps leads the world in this! negative connotation to this jugaad notwithstanding, we need to think positively and appreciate that innovation or jugaad - in a positive way - is going to be critical for india - not only for competitive advantage, but also to ensure that our future development is sustainable and inclusive. the authors flag six principles of jugaad in emerging countries which is worth recounting to an audience like this : 1. seek opportunity in adversity 2. do more with less 3. think and act flexibly bis central bankers ’ speeches 4. keep it simple 5. include margin 6. follow your heart these six principles when viewed in the context of this conference can be interpreted to pose some fundamental issues. first, can the prepaid industry today proclaim that they have done all what could have been done? i am of the view that although the regulator has authorized the non banks to enter the payments sphere and the non - banks have largely chosen ppi, the results are not very heartening and encouraging. available data indicates that the growth of the issuance of ppis in india has and continues to be sluggish. the average issuance of ppis during the year averaged 48. 96 million, with a peak issuance of 57. 46 million in july 2011. and even amongst these numbers, it has come to our notice that a particular ppi issuer has issued ppis of re 1 / – each in large numbers! reflecting this growth pattern, the volume of transactions ( 2. 3 percent ) and value transacted ( 2. 5 percent ) with ppis as a percentage of total card transactions is also very marginal. second, has the regulator done what could be done? let me try and defend myself. rbi has always been in the forefront of building an enabling environment for the players of the payment industry. since