kishori j udeshi : a bit of tomorrow keynote address by ms kishori j udeshi, deputy governor of the reserve bank of india, at the bfsi conclave 2005 on technology solutions for business transformation, mumbai, 7 june 2005. acknowledgements for inputs are due to s / shri a k hirve, s ganesh kumar and a madhavan. * * * the topic for today ’ s conclave is “ technology solutions for business transformation ” and i have chosen to speak on “ a bit ( banking and information technology ) of tomorrow ”. i do not consider myself as being even computer savvy. but one does not have to be an it professional to think of how it can bring about business transformation. for this, all that the banker needs is to have vision, conviction and the courage to change. it is for the it professional to make it possible. the entire world is looking at india for its it services. let us take a harder futuristic look. while indian industry and agriculture contribute almost equally to gdp, industry gets four times the gross loans and advances from banking system than what agriculture gets. is there no potential for a transformation here and can it not provide the solution? india has around 6 lakh villages. bank penetration is around 18 villages per branch. imagine if a bank were to set up an information kiosk to cater to a cluster of say 2 to 3 villages, what would be the outcome? there is no limit to the extent of usage of such a kiosk. the farmer can know, at the click of the mouse his bank balance, entries of debit and credit in his account, outstanding loan amount, interest rate, interest charged to the account, commodity price movements, weather, expected yield and income, direct credit of receivables into his account, direct payment for purchases without involving cash and lot of other value added services, all in his native language. such kiosks could, through arrangements, even double up as vending machines. the possibilities are immense. the constraints only are adequate and quality power supply. but we have to be optimistic. and if you think that farmers are uneducated and this is grandiose thinking let me quote from c. k. prahalad1 : “ the most telling comment was from a farmer captured on video by the researchers : “ i did not know how to hold a mouse ” four months later : “ even if they take away the computer,

for 2008 - 09 resulted in write off of loans for farmers enabling them to re access the banking system. the policies have led to significant increase in share of agricultural credit to agriculture and allied gdp from 22. 7 per cent in 2004 - 05 to 33. 3 per cent in 2008 - 09. the compounded annual growth rate of agriculture credit was 28. 4 per cent during 2003 - 08 as compared to 24. 5 per cent for overall bank credit in this period. the fact that overall private capital formation in agriculture has declined during this period would suggest that most of the incremental credit has gone for production and not for investment. this is an issue which needs more study to understand the factors that are impeding private capital formation in agriculture. these would be obviously closely linked to the factors identified as impeding growth in agriculture. micro and small enterprises ( mses ) while non financial factors may be more important in the agricultural sector, in the mse sector, credit is a vital input for growth. as per the data on micro and small enterprises ( mses ) in the annual report of ministry of micro, small and medium enterprises, 2006 - 07, the sector accounted for around 39 per cent of total industrial production, 34 per cent of the exports in the industrial sector and around 35 per cent of total employment among units engaged in manufacturing and services. the sector registered a robust annual average growth in value of output, exports and employment at 16. 8 per cent, 20. 0 per cent and 4. 4 per cent, respectively during the expansionary phase of 2003 - 07, before showing signs of slowing down in 2007 - 08 particularly in respect of employment growth to 2. 9 per cent. according to the annual report of ministry of micro, small and medium enterprises, 200607, fixed investment in the sector constituted 37. 8 per cent of the value of production from the sector in 2005 - 06 ( decline sharply from 59. 9 per cent in 1999 - 2000 and 51. 6 per cent in 2002 - 03 ). credit to the sector as share of gdp of the sector however rose marginally from 55. 0 per cent in 1999 - 2000 to 56. 7 per cent in 2006 - 07. in terms of overall bank credit, credit to mses declined from 14. 5 per cent in 1999 - 2000 to 7. 2 per cent in 2006 - 07. although annual growth rate of credit to this sector was more than 20. 5 per cent in this period, credit to the