accordingly the plan aims for an eclectic mix of development of capital market, more specifically debt market, besides exhorting bank finance. 15. being from the reserve bank, let me ponder more over banks ’ role in the coming years. bis central bankers ’ speeches banking sector reforms 16. leading economists most often cite the importance of sound financial sector reforms as being central to a healthy banking system that aids economic growth. india is the largest country in south asia with an extensive financial system characterized by varied financial institutions, comprising of both banks and non - banks. banks are the mainstay of the financial system with bank assets comprising, on average, around 70 percent of gdp during the postreform period. the commercial banking segment comprises of 26 public sector banks in which government has majority equity stake, 20 private sector, including 7 de novo ( which became operational after initiation of economic reforms in 1991 ) private banks, although rbi has recently done away with this distinction and over 40 foreign banks, which operate as branches. 17. prior to the inception of financial sector reforms in 1991, the indian financial system can best be characterized as highly regulated and financially repressed. the prevalence of high reserve requirements, interest rate controls and allocation of financial resources to predesignated sectors adversely affected banks ’ resource mobilization and allocation. 18. the period 1992 – 97 laid the foundations for reforms in the banking system. the reforms comprised of five major planks : cautious and proper sequencing, mutually reinforcing measures, complementarities between banking reforms and other associated policies ( e. g., monetary, external, etc. ), developing financial infrastructure and nurturing and developing financial markets. some of the salient reforms undertaken in the financial system, included, among others, lowering of statutory reserve requirements ; liberalizing the interest rate regime, first on the lending side and later, on the deposit side ; infusing competition by allowing more liberal entry of foreign banks and permitting the establishment of de novo private banks ; institution of prudential measures ( capital adequacy requirements, income recognition, asset classification and provisioning norms for loans, exposure norms, accounting norms ) and enhanced disclosures and levels of transparency in their annual audited statements to promote market discipline. 19. over the period of reforms beginning 1992 through 2013, real bank assets have grown at a compound annual rate of about 10 % ; the growth rate of deposits and credit both in real terms, during the same period has been roughly of the order of 10

executing the work, with labour inputs from the villagers themselves so as to keep costs and consequently the loan amount low. there is no subsidy element in the financing. while returning from this village, we passed through another village. it was dark and suddenly as the cars headlights hit the road, we saw women from either side of the road getting up hurriedly. this image starkly brought home the meaning of the mdgs for ensuring human dignity. these cases represent the progress that can be made in achievement of mdgs where there is local leadership, community participation and involvement of the financial sector with the government playing a facilitating role. what is significant is that in both these cases there is no subsidy or budgetary support. the question is whether these are replicable and can we achieve the desired scale? the answer is yes provided the three pillars, viz., the state government, the formal financial system and the community based organisations work together. without connecting rural roads, there is very little that can be achieved by the formal financial system or ngos. hence it is appropriate that due emphasis is being placed on rural roads and rural connectivity. this has to be an area for priority for state funding. the shg movement in india has enabled social and economic inclusion of women. the shg - bank linkage movement where shgs are linked to banks in a gradual way - initially through savings and later through loan products - has been able to ensure financial inclusion to a certain extent. however, there is a need to increase their credit absorptive capacity as a large number of shgs linked to the banking system are utilising the credit only for consumption purposes. they have to migrate to employment generating activities so as to be able to fully reap the benefits of economic freedom. nevertheless, the shgs and in many cases shg federations have played a pivotal role in the creation of social capital and empowerment. there are hundreds of examples where the shgs have worked with ngos and government agencies to bring drinking water to their villages, conduct regular health camps, organise adult literacy camps and generally improve the social status of members. for example, the shg federations active in tamil nadu have been able to provide life insurance products through an internally administered scheme. in kerala, the kutumbashree model set up by the government covers a variety of financial services as also health insurance. the friends of women's world banking ( fwwb ) have started a social security project in association with micro finance agencies / ngos