. in particular, determined emphasis on financial inclusion, financial literacy and credit counselling is appropriate and, therefore, should continue. in the external sector, the approach is towards fuller capital account convertibility, with focus on the enabling conditions for minimizing the risks and maximizing the benefits. are we reasonably confident that we can meet the challenges and maintain the present growth momentum with stability? there are grounds for optimism and these include democratic values, financial system stability, skilled manpower, technological capabilities, demographic dividends, large and growing entrepreneurial class, and penchant for innovation. the single most critical determining factor for the future would, by all accounts, be the improvements in governance that impacts personal security, property rights, business environment, and above all, a sense of fairness in the conduct of public policy. india and lse before concluding, i would like to recall that many distinguished indians benefited from education at the lse. the most prominent, of course, are dr. b. r. ambedkar, the architect of the indian constitution and an eminent economist, and mr. k. r. narayanan, a reputed diplomat and former president of india. in a way, india might have, perhaps, repaid its debt through dr. i. g. patel, who steered the lse, as its director, during a critical period. now, india and lse are entering a period of productive partnership, in which rbi is privileged to play an active role. let me thank all those assembled here for participating in the launch of the india observatory in the lse.

k c chakrabarty : empowering msmes for financial inclusion and growth – the role of banks and industry associations address by dr k c chakrabarty, deputy governor of the reserve bank of india, at the “ sme banking conclave 2012 ” organised by the sme chamber of india, mumbai, 4 february 2012. * * * assistance provided by smt lily vadera in preparation of this address is gratefully acknowledged. shri g. n. bajpai, former chairman, sebi & chairman, indian sme knowledge forum, shri m. narendra, chairman & managing director, indian overseas bank, shri n. shankar, cmd, ecgc, shri a. krishna kumar, md, sbi, shri r. k. dubey, ed, cbi, dr k. ramakrishnan, ceo, indian banks ’ association, shri k v srinivasan, ceo, reliance commercial finance ltd, shri chandrakant salunkhe, president, sme chamber of india, sme entrepreneurs, other distinguished guests, members of the print and electronic media, ladies and gentlemen. 1. it is a matter of great pleasure for me to be present here today at the “ sme banking conclave 2012 ” and share some of my thoughts and experiences on the development of msmes which is a vital sector of our economy. this conclave gains importance in the context of globalization when the small and medium enterprises ( sme ) face challenges and take advantage of opportunities created. such a forum helps in garnering and shaping public opinion, building consensus, crystallizing policy inputs and giving us feedback on our policy initiatives. i congratulate sme chamber of india for organizing the “ sme banking conclave 2012 ”. the sme chambers has succeeded in bringing a large number of msmes under a single umbrella, thereby, making it a potent and active forum for dialogue with the potential partners in the development of the msme sector in the country, which includes the industry, the financial sector and the government. importance of the msme sector 2. as all of you are associated in some ways with the msme sector, its critical role and place in the indian economy is very well known to all of you in terms of employment generation, exports and economic empowerment of a vast section of the population and i do not want to spend a lot of time overemphasizing it. but let me quote just a couple of statistics