into question. we cannot go backwards to revive the two bargains – that means reversing development and bottling the genie of competition, neither of which would be desirable for the economy even if feasible. instead, the best approach may be to develop the financial sector by bis central bankers ’ speeches increasing competition and variety, even while giving banks, especially public sector banks, a greater ability to compete. let me be more specific. increasing competition in banking the reserve bank of india is committed to freeing entry in banking. we just announced two new commercial bank licenses after a rigorous vetting process. we are examining this experience, and after making appropriate changes, will announce a more regular process of giving licenses – what has been termed licenses on tap. because of the public ’ s trust in banks and the presence of universal deposit insurance, we have to be careful in giving out the normal commercial bank licenses. to be absolutely confident of the capabilities and integrity of applicants, we give licenses only to those who have a proven track record and reasonable capital. but what of those who have no track record or no large fund base but do have capabilities? and what of those who see synergies in doing only one part of the banking business such as payments? the rbi can take more of a chance with new players if they get the license to open only a small bank or to conduct only one segment of banking business. such differentiated licenses – licenses with restrictions on the geographical reach or the products offered by a new bank – can generate more organizational variety and efficiency. small banks tend to be better at catering to local needs, including needs of small and medium businesses. a payments bank, which will take deposits and offer payment and remittance services but be constrained to invest all its funds in safe instruments such as government securities, could be very synergistic with other existing services. for example, the proposed post bank could start as a payment bank, making use of post office outlets to raise deposits and make payments. key in any new structure is that there should be no arbitrage possibilities hurting the current banking system. today, a commercial bank can convert itself into a payment bank by maintaining 100 percent slr margins. of course, it may not want to, because it seeks to make more money through corporate lending, but this possibility indicates regulations will not favour a payments bank unduly. some of my colleagues believe a payments bank will be unviable, while others believe that it will skim the cream of

europe, the eurosystem decided to migrate from target as a system of systems, to a single shared platform, target2, where the rules of the different legal systems are harmonised to the greatest possible extent. let me now say a few words on the second of these ecb initiatives : the so - called ccbm ( correspondent central banking model ). as you know, all eurosystem credit operations have to be adequately collateralised by eligible assets. moreover, the eurosystem's operational framework stipulates that counterparties can only obtain credit from the national central bank in the country in which they are located, and that any eurosystem counterparty should be able to use any eligible asset as collateral. thus, a specific mechanism had to be established to enable the cross - border use of collateral, regardless of the location of the asset or the counterparty. against this background, the eurosystem introduced the ccbm in 1999 in parallel with target. through the ccbm, counterparties obtain credit from their " home central bank " based on collateral provided to another eurosystem central bank and this " correspondent central bank " holds the collateral on behalf of the home central bank. in the current framework for the delivery of collateral, the ccbm provides for a common cross - border procedure, while national collateral delivery procedures are still not harmonised. the ccbm has proved to be a success, as the cross - border use of collateral has increased significantly. however, market participants have found some drawbacks in this system which mainly relate to the lack of standardisation of existing procedures, both domestically and at cross - border level. against this background, the governing council decided in march 2007 to review the current eurosystem collateral handling procedures. in july 2008, it has decided to launch a single technical platform – called ccbm2 – and assigned the development and operation of ccbm2 to the national bank of belgium and de nederlandsche bank. ccbm2 will first and foremost provide a harmonised level of service, thus facilitating interaction between the eurosystem central banks and their counterparties. while the ccbm was built for the cross - border use of collateral only, ccbm2 will provide a single set of uniform procedures both on a domestic and a cross - border basis. ccbm2 will handle all eligible collateral, marketable as well non marketable. it will consequently allow to manage securities but also incorporate functions for the use of credit claims as collateral. furthermore,