, touch on the ethical dimensions of rbi ’ s mandate. the reserve bank has a broad mandate. as central banks go, i believe we are a “ full service ” central bank. we are the monetary authority, we issue currency, we are the regulator of banks and non - bank finance companies and much of the financial markets. we regulate also the payment and settlement system. we are the debt manager for the central and state governments and the gatekeeper for the external sector. what guides us in fulfilling this broad mandate is a sense of institutional values and professional integrity. let me give a few examples. one of the core aims of monetary policy is to maintain price stability. if we fail in that regard, there would be inflation. and inflation, as we know, is a perniciously regressive tax that hurts the poor the most. so, by maintaining price stability, we are safeguarding the well being of the poor in society. we take our regulation responsibility seriously. an important guideline for regulation is to protect the interests of depositors. we therefore ensure that banks are well capitalized, prudently managed and that they have adequate and appropriate internal controls. our regulatory responsibility also casts an obligation on us of protecting the interests of the borrowers. we need to ensure that borrowers get credit at remunerative rates of interest and that they are not disadvantaged by information asymmetries. we advise banks not to charge excessive / usurious rates of interest on non - priority sector personal loans and credit card dues. we have asked that banks should communicate publically information on the maximum interest chargeable to any type of loan or advance. we have mandated that service charges should be reasonable and have some relation to the cost of rendering the services. we have a system of banking ombudsman to address the grievances of customers. i cannot claim that we are the best practice in dispute resolution, but i can claim with pride that we try our best to be the best practice. in recent years, we have been focussing on financial inclusion and financial literacy. the aim of the financial inclusion campaign is to provide access to financial services to people in remote and rural areas and poorer segments of the society. our stress is on expanding the reach of financial services to ensure that every household has a bank account. but the aspiration extends, beyond merely chasing a target, to the quality of financial inclusion. not only should the poor have an account, but they should also be

. my second illustration is a variation of what is called the ultimatum game. say, a team of two people, a and b, accomplishes a task by putting in equal effort, 50 - 50. the manager gives rs. 1000 to a and tells him to share it between them according to their respective contributions to the task. the rules of the game are that a can divide the money in any proportion he wants. and b has the option to accept or reject the offer. if b accepts the proportion in which money has been divided, both get to keep the money. if b rejects the offer, both lose and the rs. 1000 goes back to the manager. the rules put pressure on a to divide the money at least roughly in proportion to their respective contributions. anything markedly out of line will annoy b, and she will likely reject the offer even if she is losing what she otherwise could have gotten. in other words, in the face of overt dishonesty, it becomes more important for b to make a lose rather than cut losses for herself. the ultimatum game illustrates how you cannot move ahead in life or in business without a sense of values. tools and concepts of ethical reasoning belong with the other valuable instruments of financial practice. people often forget that the godfather of modern capitalism, and often called the first economist – adam smith – was not an economist, but rather a professor of moral philosophy. smith had a profound understanding of the ethical foundations of markets and was deeply suspicious of the “ merchant class ” and their tendency to arrange affairs to suit their private interests at public expense. in his book, “ a theory of moral sentiments ”, smith argues that a stable society is based on sympathy, a moral duty to have regard for one ’ s fellow human beings. in short, smith emphasized the ethical content of economics, something that got eroded over the centuries as economics tried to move from being a value based social science to a value free exact science. ethical dimensions of rbi ’ s mandate i note that following my speech and that of my senior colleague and widely respected former governor, dr. reddy, this conference has scheduled two panel discussions. the first is on the “ role of the regulator – governance and regulation ” and the second on the “ role of individual financial institutions and corporate responsibility ”. i also note that the panellists are some of the most distinguished leaders of the indian financial sector. both these topics have a connection with rbi ’ s role and responsibilities. so, let me briefly