banking services. the codes and rrbs 15. all banks offer the same products with variants but what distinguishes and sets apart and gives the competitive edge to a bank is the quality of customer service extended by the bank. 16. the codes are the rrbs mandate, adopted by rrbs with the specific approval of the board of directors. rrbs must take full ownership of these codes and facilitate their adoption ensuring complete adherence. 17. rrbs have undergone a sea change. they are now almost treated on par with other commercial banks. the customers of the rrbs are illiterate and poor ; there is also an asymmetry of information. hence the adoption of standards of behaviour and codes of conduct framed by bcsbi for dealing with customers is an imperative. 18. at one point we are all customers of banks. what are the ingredients of treating customers fairly? transparency, proper disclosure, non - discriminatory and non - exploitative pricing, building a robust and responsive grievance redressal mechanism within the bank and also making the customer aware of redressal available through the banking ombudsman scheme. transparency does not mean bombarding the illiterate customer with humungous bis central bankers ’ speeches amount of information which she is neither able to understand or use. it merely means no hidden charges. the customer must up front understand what she is letting herself in for ; the terms and conditions of the contract should be clearly understood. 19. the codes need to be clearly understood and fairly implemented by regional rural banks. banks are commercial establishments. they are not philanthropic organizations. however, they enjoy great leverage and an oligopolistic position simply as the borrower in the rural areas may lack choice which his urban counterpart enjoys. this casts a much greater responsibility upon the rrbs. knowledge and general awareness about the codes of the bcsbi needs to be increased. just this morning, mr mahajan shared with me that despite valiant attempts knowledge of and appreciation of the bcsbi codes was spreading very slowly and this was a cause of concern. the chairmen of the rrbs must appreciate that the poor borrower who comes to the door step of the bank is highly unlikely to meet the chairman of the bank. for him the frontline manager is the bank. the frontline manager needs to be sensitized to the importance of the code of bank ’ s commitment to customers. he must understand and believe in them. this affirmation will then translate to increased

down in line with growth deceleration. several idiosyncratic factors are put forward to explain this uniqueness of our macroeconomic situation : supply bottlenecks, particularly in infrastructure, bis central bankers ’ speeches sectoral imbalances, rise in wages without a corresponding increase in productivity, higher fiscal deficit and larger depreciation of the exchange rate than in the case of our peers. reserve bank ’ s action to curb inflation 32. to control inflation, the reserve bank reversed the crisis period ’ s accommodative monetary stance in quick order. we raised the policy interest rate ( repo rate ) 13 times, cumulatively by 375 basis points ( bps ) – from 4. 75 per cent to 8. 5 per cent. also we raised the reserve requirement on banks – the cash reserve ratio ( crr ) – by 100 bps from 5 per cent to 6 per cent. monetary policy is known to work with lags, and as a consequence of the tight monetary policy, wpi inflation which peaked at 10. 9 per cent in april 2010, has come down to 6. 6 per cent in january 2013. 33. in response to deceleration in growth and decline in inflation, the reserve bank eased the monetary policy stance starting january 2012 cutting both the repo rate ( by 75 bps ) and the crr ( by 200 bps ). criticism against reserve bank ’ s monetary policy stance 34. the reserve bank has been criticized for its anti - inflationary stance. let me address some of the main strands of that criticism if only to illustrate the dilemmas that we face in managing the growth - inflation trade - off. monetary policy has only stifled growth, but has not tamed inflation 35. by far the most common criticism has been that tight monetary policy has stifled growth but has not tamed inflation. my response to this criticism is the following. first, inflation has come off from its peak by over about 4 percentage points. admittedly, growth too has moderated. however, the reserve bank ’ s anti - inflation stance is motivated by the dictum that inflation is inimical to growth and that only in a situation of price stability can consumers and investors make informed choices. 36. it is important also to note that in order to contain inflation, monetary policy seeks to curb demand which, in turn, restrains growth. as per this logic, reduction in growth is an inevitable outcome of tight monetary policy. but this sacrifice is only