non - coercive methods of recovery, measures to contain multiple lending and over - indebtedness. government of india has come out with the microfinance institutions ( development and regulation ) bill, 2011 which, among other things, envisages the reserve bank of india as the sole regulator of microfinance sector covering all forms of mfis in addition to nbfc – mfis which are presently being regulated by the reserve bank. the bill has been circulated among various stakeholders for their views. iii. key lessons and the way forward having briefly covered the background to the current state of affairs let me now focus on some of the specific issues that need to be examined to address the current impasse. while a number of reasons have been attributed for the turmoil in the sector, such as, unjustified high rates of interest, lack of transparency in interest rate and other charges, multiple lending and over - borrowing, coercive methods of recovery, etc. i would consider the governance deficit coupled with people risk, process risk and relationship risk as the more critical factors that have precipitated the turmoil and need to be addressed. mfis need to seriously examine bis central bankers ’ speeches their governance systems and align their practices with the overall objective of microfinance which is to facilitate financial inclusion and empower poor. governance in mfis governance, as we all know, is essentially about doing business and maximizing shareholders ’ wealth legally, ethically and on a sustainable basis. being fair and to be seen as being fair to all the stakeholders without discrimination or bias, is the test for good governance. governance system represents the value framework, the ethical framework, the moral framework as also the legal framework under which business decisions are taken. governance would encompass self regulation both at the individual entity level and at industry level through the sro mechanism. these two would form the first line of defence with the regulatory framework providing the backstop. in the absence of effective self regulation, the regulatory framework becomes more prescriptive which raises costs to regulators and supervisors in administering the regulatory framework and also increases compliance costs to the regulated entities. this clearly is a suboptimal solution. the considerable intellectual appeal of principles based regulation which had committed proponents is a case in point. in the wake of the subprime crisis of 2008, it has yielded considerable ground to the proponents of rules based regulation. let me clarify that principles based regulations and rules based regulations are not binary choices.

whatever “ agley ” means. a more contemporary philosopher, forrest gump, said something similar about life and boxes of chocolates and not knowing what you are going to get. they were both right. life is amazingly unpredictable ; any 22 - year - old who thinks he or she knows where they will be in 10 years, much less in 30, is simply lacking imagination. look what happened to me : a dozen years ago i was minding my own business teaching economics 101 in alexander hall and trying to think of good excuses for avoiding faculty meetings. then i got a phone call... in case you are skeptical of forrest gump ’ s insight, here ’ s a concrete suggestion for each of the graduating seniors. take a few minutes the first chance you get and talk to an alum participating in his or her 25th, or 30th, or 40th reunion – you know, somebody who was near the front of the p - rade. ask them, back when they were graduating 25, 30, or 40 years ago, where they expected to be today. if you can get them to open up, they will tell you that today they are happy and satisfied in various measures, or not, and their personal stories will be filled with highs and lows and in - betweens. but, i am willing to bet, those life stories will in almost all cases be quite different, in large and small ways, from what they expected when they started out. this is a good thing, not a bad thing ; who note to journalists : this is a joke. my leave from princeton expired in 2005. bis central bankers ’ speeches wants to know the end of a story that ’ s only in its early chapters? don ’ t be afraid to let the drama play out. 2. does the fact that our lives are so influenced by chance and seemingly small decisions and actions mean that there is no point to planning, to striving? not at all. whatever life may have in store for you, each of you has a grand, lifelong project, and that is the development of yourself as a human being. your family and friends and your time at princeton have given you a good start. what will you do with it? will you keep learning and thinking hard and critically about the most important questions? will you become an emotionally stronger person, more generous, more loving, more ethical? will you involve yourself actively and constructively in the world? many things will happen in your lives