line / off - line methods and market intelligence to avoid any serious setback to the payment systems. the soundness of retail payment system remains the critical element of the regulatory framework and supervisory policies of central banks and regulators. it is the responsibility of the regulators to ensure that the policies are aligned with the country ’ s economy and its emerging needs without sacrificing the sound principles of safe payment system. another aspect of safety would be the availability of robust business continuity plan ( bcp ) and disaster recovery ( dr ) framework so that critical payment systems remain robust and are able to handle disruptions in efficient manner. suitability although the urge for replicating the successful payment systems of other countries in one ’ s own country is very high, it is necessary to customize the processes and products as per the suitability to the country keeping in view particularly the socio - economic and cultural distinctiveness and the regulatory and institutional aspects regulators need to assess effectiveness of different payment products in their jurisdictions by the authorized entities to ensure that they suit the needs of the common people, the complexities are understood by them and they have inbuilt provision for consumer protection ( principles 21 and 23 of the pfmi ). there should be an institutional mechanism to assess and certify the retail payment products that matches minimum laid down norms by the regulators. regulators also need to keep a check on proliferation of products and systems which are difficult to monitor. the suitability may be assessed from the point of view of the smart principles, i. e., simplicity, manageability, acceptability, risk controls and transparency. standards it is very important to create standards and principles that create a level playing field for the system participants, system providers and consumers. standards like pfmi, basel iii and iso help in creating best practices that act as benchmarks for the players and the industry. bis central bankers ’ speeches standards also reduce discretionary powers leading to fewer disputes and chances of favouritism. while setting standards, we need to be sensitive to the practicality of their implementation. setting higher standards that are not achievable by the stake holders will remain on paper. further, standards need to be flexible to cater changing needs and should not act as barriers for the entry of new payment system players. standards should take into account cost of compliance as that is ultimately passed on to consumers. one example is policy of regulators on default handling and guarantee mechanism ( principle 13 of the pfmi ) applicable for retail payment

country today, the msme sector stands as a beacon of hope. realizing the potential that the sector holds, both government of india and reserve bank of india have been laying substantial emphasis on means to energize the sector. among the goi initiatives that have a bearing on the sector are provision for udyog aadhaar, start - up india, make in india and steps for improving “ ease of doing business ” in the country. likewise, reserve bank of india has also been very conscious of the needs of the msmes and has hence, initiated a plethora of steps to support them through their lifecycle. i will delve upon some of these measures in the course of my address today. strengthening the banking system for lending to msmes 4. with a view to strengthen the reach and scope of credit delivery mechanism for small entrepreneurs and businesses, rbi has recently issued in - principle approvals for setting up of 10 small finance banks ( sfbs ). the sfbs are mandated to extend 75 per cent of their adjusted net bank credit ( anbc ) to the sectors eligible for classification as priority sector lending ( psl ) by rbi. further, these banks are also mandated to ensure that at least 50 per cent of their loan portfolio should constitute of loans and advances of up to annual report ministry of micro, small and medium enterprises 2014 – 15. bis central bankers ’ speeches rs. 25 lakh. this is intended to ensure that these sfbs have a diversified loan book with exposures to small entrepreneurs. we believe that together with the existing players, these banks would be able to meet the credit needs of small businesses in a holistic and timely manner, which is so central to the financing needs of the msmes. 5. the recent revision to the priority sector lending guidelines has also sought to facilitate flow of credit to the sector. while on the one hand, the target for banks ’ lending to micro enterprises has been progressively increased to 7 percent by march 2016 and 7. 5 percent by march 2017, medium enterprises have been brought within the ambit of priority sector, whereby all loans to medium enterprises in the manufacturing sector and those up to rs. 10 crore in the service sector now qualify for priority sector classification. 6. an extremely important, but relatively much less appreciated aspect of credit delivery system is the availability of trained human capital within the banks. bankers ought to have a sound understanding of the businesses that they finance. in respect of established businesses with predictable cash flows,