k c chakrabarty : convergence of mobile banking, financial inclusion and consumer protection - trend remarks by dr k c chakrabarty, deputy governor of the reserve bank of india, at the financial consumer protection network ( finconet ) meeting, oecd headquarter, paris, 9 november 2011. * * * assistance provided by ms radha somakumar in preparation of this address is gratefully acknowledged. ms ursula menke, commissioner, financial consumer agency of canada and chair of the international financial consumer protection network ( finconet ), distinguished participants, ladies and gentlemen. 1. i thank the finconet for including a special session on financial inclusion, mobile banking and consumer protection in today ’ s agenda and inviting me to share the indian perspective. further, given the extent of financial exclusion that prevails in india where out of the 6, 00, 000 habitations in the country, less than 30, 000 have a commercial bank branch, only 55 % of the population have deposit accounts, and the proportion of people having any kind of life insurance is as low as 10 per cent, the rbi and the government of india are in recent times aggressively focussing on financial inclusion as one of the most important drivers of inclusive growth. 2. in a technology driven financial sector scenario, although intermediation is probably more tiered, it should eventually result in lower costs, greater financial inclusion and customer protection. customer protection becomes more important and perhaps more difficult due to such an intermediation. given this scenario, the rbi makes a conscious evaluation of the customer service and financial inclusion issues while approving any new innovation in the financial sector in general and payment system in particular. the fact that the rbi had appointed a high level committee on customer service in banks headed by mr. m. damodaran and representations from both the industry and the public to examine the entire gamut of customer protection issues indicates the importance which we attach to customer service and protection. the committee incidentally has come out with more than 100 recommendations for our consideration. 3. let me now turn to specific issues i have been asked to speak on viz. mobile banking, financial inclusion and consumer protection. a. bank - led vs non - bank led model of mobile banking 4. we were confronted with the question “ which model of mobile banking should india go for – a bank led model or a non - bank led one? ” protagonists of the non - bank led model referred to the success of such models

of the monetary actions listed in the table. first, even while the indian economy has recovered quite rapidly from the slowdown, there is persistent global uncertainty. emes have generally done quite well in coming out of the crisis, but a major part of the global economy – the us, the uk, the euro zone – is not only showing only very modest signs of recovery, it is also manifesting new stresses, partly as a result of the huge build - up of sovereign debt, which governments used to support their various fiscal stimulus packages. over the past few weeks, optimism about a sustained, even is slow, global recovery, has been giving ground to concerns about another imminent slowdown. one thing that we learnt from the events of 2008 – 09 was that india is not immune to global turbulence. be it through trade, capital flows or a general sense of confidence about economic prospects, a global problem quickly becomes a domestic one. given these linkages, the risks from the global economy need to be taken into consideration while formulating domestic policy. second, the reality is that the policy instruments are far from being in a normal position. as the economy recovers, it is imperative that policy instruments be brought as quickly as possible back to a position consistent with the state of the economy. this is essential for the management of expectations as well as to re - create the capacity to respond, should another shock hit the economy. but, as important as it is to return to normal quickly, it is equally necessary to do so non - disruptively. the kind of rapid and massive reductions that were made to instruments during the crisis simply cannot be replicated in the reverse direction. growth is picking up and confidence gradually returning to businesses and consumers, but given the vividness of the crisis, the process is still likely to be vulnerable to both external shocks and domestic ones. rapid transitions in the policy regime might constitute one such shock. in essence, on this consideration, while rapid and drastic actions are entirely warranted when dealing with a crisis, managing a return to normalcy requires a more gradualist and calibrated approach. third, notwithstanding the above two issues, the fact is that inflation has taken hold, with both supply and demand pressures contributing to it. monetary policy must respond. the table indicates that it indeed has. action on rates and liquidity, through the crr, began in january and has continued at the measured pace indicated earlier over the past six months. one strong criticism of the reserve bank