is hoped, will address this concern to a large extent. this is also a challenge which i am sure that the idrbt will also take up in right earnest for the benefit of the financial sector as a whole. the growth in mobile communications and the exponential usage of mobile telephony by india ’ s masses is an aspect which in my view, banks have to look upon as an opportunity to harness to their benefit. the power of the chip in the mobile phone is enormous and its usage for secure banking transactions needs to be examined and provided for. i would also like to touch on another challenge which banks are slowly overcoming. the need for regular, sustained is audit is being highlighted by the reserve bank for some time now. while some initiatives have been taken by banks towards achieving this, much more needs to be done. the speed with which it implementation and upgradation is being done may outpace the frequency of is audit and it is in the best interests of banks that this vital activity is given due importance. it also facilitates a host of other functions which banks have been hitherto performing through manual operations. let me take up the case of verification of the genuineness of the customer - the know your customer or kyc factor. technology facilitates easier access to verification of information on a real time basis. since it tools provide a scientific and almost real time monitoring and analysis of funds movement, this would help a great deal in ensuring compliance to anti - money laundering requirements. many it based banking solutions have incorporated sophisticated algorithms and comprehensive permutations and combinations to provide alerts on a real time basis. such a facilitation may well be impossible using manual means. another vital aspect that has to be taken cognisance of is that technological deployment must always be consistent with the levels of expertise in each bank as well as the nature and sophistication of its customers. alternatively it is important to train all the stake holders to ensure a smooth technological transformation. many of you must have had occasion to read the book ‘ freakonomics ’ by steven levitt and stephen dubner. the narrative there on the lifetime episode of paul feldman on the sale of the american bread - bagels is an eye opener. he commenced sale of the bagels in an unsupervised manner which led to a situation where the buyers did not always pay for their offtakes. nevertheless the recovery rate was rather encouraging. he further studied the behaviour - versus - payment patterns and came out

funds available to the financial services industry represent a nation ’ s wealth. as such, the least we can think of is protecting the owners of this wealth, not merely in terms of deposit insurance but also in terms of day to day transactions and contractual relationships a consumer has with the banking and financial services industry. consumer trust and protection has always been an issue of interest and concern for policy makers and the entire financial industry. the debate has become particularly acute over the last few years in view of the recent market developments. in times of globalization, new opportunities in terms of new financial products, new instruments and technologies became available posing new challenges for the consumers such as understanding the risks associated with complex products. the current levels of transparency and the consequent difficulty of consumers in identifying and understanding the fine print from a large volume of information leads to an information asymmetry between the financial intermediary and the consumer. from the perspective of policy makers, including the reserve bank of india and other financial sector regulators, financial literacy is a must to gauge the needs of the population and financial institutions, so that financial resources can be translated into higher economic growth while minimizing the financial stability risks. it is widely believed that the complex financial instruments that contributed to the financial crisis essentially had their basis in the boom period home loans, the credit quality of which was poorly assessed. apart from the credit quality issues which went against the interest of the lenders, the interest of the borrowers were also severely compromised as they were lured into the complex yet alluring deals without being assessed for their repaying capacity based on their prospective income and net worth. costs of such irresponsible lending and borrowing were borne by tens of millions of tax payers in the form of bailout of beleaguered institutions. the financial services industry players need to evolve efficient consumer policies that must be based on two main pillars : financial education and transparent information on one side and competition on the other. these aspects are central to foster the confidence of consumers and help them make informed financial decisions and select the products best suited for their needs. competition is an important dimension of consumer policy which has a positive impact on prices, quality of service and choice of products. was this evident when we were going through turmoil in the global financial services industry? perhaps not. we, therefore, have to harmonize the role of regulation, competition and financial education to achieve the twin objectives of consumer protection and financial sector stability. bis central bankers ’ speeches financial consumers need