##ksha abhiyan, and the like. a committee on financial inclusion ( chairman : dr. c. rangarajan ) has also been constituted by the government of india in june 2006 to recommend a strategy to achieve higher financial inclusion in the country. likewise, enabling access to a greater number of the population to the structured and organised financial system has explicitly been on the agenda of the reserve bank since 2004. unlike several central banks, which focus solely on inflation, many developed and emerging economies, including ours, focus also on growth. there is currently a clear perception that there are a vast number of people, potential entrepreneurs, small enterprises and others, who are excluded from the financial sector, which leads to their marginalisation and denial of opportunity for them to grow and prosper. the reserve bank has therefore introduced various new measures to encourage the expansion of financial coverage in the country. not only is financial inclusion essential because of its implications for the welfare of citizens but it needs to be stressed that it has to be an explicit strategy for fostering faster economic growth in a more inclusive fashion. it is in this context that i thought it would be appropriate to place the strategy of financial inclusion in the wider context of economic growth and financial deepening. my ideas on this topic are organised along the following lines. to begin with, i shall dwell upon the process of growth and financial deepening in india. this will be followed by definitional aspects and some evidence from the experience of other countries, with regard to financial inclusion. thereafter, the focus would be on interlinking the relevance of financial inclusion in our economy, which has entered a high growth orbit, with the rural economy. the penultimate section focuses on the role being played by the reserve bank in this regard. my concluding thoughts would be in the nature of issues that have a bearing on financial inclusion. ii. economic growth the growth trend of the indian economy over the last few years appears to indicate the beginning of a new phase of higher growth. from an average growth rate of around 6. 0 per cent for a quarter of a century, the growth rate has accelerated to 8. 1 per cent over the last few years. along with declining population growth, this suggests high growth in per capita income in excess of 6 per cent in recent years, and perhaps approaching 7 per cent, which would lead to doubling of per capita income every ten years. most importantly, the current growth process is not a flash in the pan and is exhibiting signs of sustainability along with

- owned public sector banks declined sharply from about 90 per cent to less than 10 per cent of aggregate assets of all scheduled commercial banks during this period. diversification of ownership has led to greater market accountability and improved efficiency. third, with a view to enhance efficiency and productivity in the banking sector through competition, the private sector and the foreign - banks were allowed more liberal entry. since 1993, twelve new private sector banks have been set up. as a major step towards enhancing competition in the banking sector, foreign direct investment in the private sector banks is now allowed up to 74 per cent, subject to conformity with the guidelines issued from time to time. fourth, consolidation in the banking sector has been another feature of the reform process, which also encompassed the development financial institutions ( dfis ), which have been providers of long - term finance. the rbi enabled the reverse - merger of a large dfi with its commercial - banking subsidiary, which was a major initiative towards universal banking. subsequently, another large term - lending institution has been converted into a bank. the mergers between non - banking financial companies and banks as also between private sector banks are now permitted, subject to the rbi guidelines. the underlying principles for consolidation would also apply, as appropriate, to the public sector banks, subject to the provisions of the relevant legislation. fifth, impressive institutional and legal reforms have been undertaken in relation to the banking sector. in 1994, a board for financial supervision ( bfs ) was constituted comprising select members of the rbi board with a variety of professional expertise to exercise “ undivided attention to supervision ”. the bfs ensures an integrated approach to supervision of commercial banks, development finance institutions, non - banking finance companies, urban cooperatives banks and primary dealers. it provides direction on a continuing basis on regulatory policies including governance issues and supervisory practices. a board for regulation and supervision of payment and settlement systems ( bpss ) has also been recently constituted to prescribe policies relating to the regulation and supervision of all types of payment and settlement systems, set standards for existing and future systems, authorise the payment and settlement systems and determine criteria for membership to these systems. the credit information companies ( regulation ) act, 2005 and the government securities act, 2004 have been enacted. certain amendments are also being considered by the parliament to enhance reserve bank ’ s regulatory and supervisory powers. sixth, a number of measures for enhancing transparency in the banking sector, through disclosures standards, have been instituted. illustratively,