a high cost venture and the growth was limited to the affluent segment. then came the trend of separating the tower infrastructure from the telco, and the tower became a market infrastructure where all telcos could ride on. what followed is the amazing and exponential expansion of mobile services, covering almost the entire population and at low and affordable cost, all the while continuously improving the quality and latest offerings as well. similarly, we may be seeing with the advent of payment banks, the universal banks may shed of costly payment infrastructure which includes high cost physical locations and bis central bankers ’ speeches assets and ride on the common, technology based, low - cost payment infrastructure that will be ushered by the payment banks, and this can bring forth exponential growth in banking services to the hitherto excluded population. the result will be financial inclusion and inclusive growth. small finance banks 23. a parallel major disruptive innovative change for inclusive growth will be the advent of small finance banks. as we observed in our 2013 discussion paper on banking structure mentioned earlier, country ‐ level studies show that small banks may perform very differently from large banks. greater access to local information, greater commitment to local prosperity, differences in costs and risk management, and competition policy could explain the specific influence of such type of banks on local economic development. in developing countries where economic development is hampered by insufficient and inadequate access to financial services in rural areas, small banks could improve financing opportunities to small and medium size enterprises and encourage entrepreneurship. 24. consequently, we announced in november 2014 that we would grant licenses to small finance banks, a new set of differentiated bank. the objective of setting up of small finance banks, like the payment banks, is also to further financial inclusion ; however, it is sought to be achieved through a different set of strategies viz., ( i ) provision of savings vehicles primarily to unserved and underserved sections of the population, and ( ii ) supply of credit to small business units ; small and marginal farmers ; micro and small industries ; and other unorganised sector entities, through high technology - low cost operations. 25. one may say that the small finance banks, or the payment banks are not the first set of differentiated banks ; the country had tried and tested, with differing degrees of success, the concept of differentiated banks and in particular the small banks, though they were not called so then, in the form of regional rural banks, way back in 1974 and the local area banks in 1996. however, while these small banks

over domestic objectives. in such situations, there is no single instrument to address the challenge. drawing from the recent indian experience, i could say that there is a need to use multiple instruments bis central bankers ’ speeches including drawdown of foreign exchange reserves, monetary tightening, augmentation of reserves and administrative measures to dampen speculative outflows and encourage inflows to stabilise market conditions. at the end it is difficult to say what worked and what did not work and how best to sequence these policies ; but surely once the pressure abates it is important to reverse extraordinary measures to reinforce market confidence. thank you. bis central bankers ’ speeches annex i : unconventional monetary policy during the crisis liquidity provision central bank ecb bank of england bank of japan us fed instruments collaterals counterparties long - term refinancing operations ( ltros ) govt. bonds banks securities markets programme sovereign paper counterparties eligible for outright monetary transactions ( omts ) marketable debt instruments eurosystem monetary policy operations asset purchase program ( aap ) long term govt. bonds and private assets non - banks, with banks as intermediaries funding for lending scheme ( fls ) abs, mbs, covered bonds, and sovereign and central bank debt banks and building societies comprehensive monetary easing programmes japanese govt. bonds ( jgbs ), corporate bonds, cps, exchange traded funds ( etfs ), japanese real estate investment trusts ( j - reits ) banks and financial institutions ( fis ) quantitative and qualitative monetary easing ( qqme ) jgbs of longer maturity, etfs, j - reits banks / fis term auction facility ( taf ) abs, mbs, treasuries, agency bonds all depository institutions large scale asset purchase ( lsap ) treasuries, agency bonds, mbs including nonbanks operation twist longer term treasuries forward guidance yes, qualitative “ open - ended ” guidance yes explicit guidance linked to unemployment and inflation threshold yes, “ openended ” guidance linked to qualitative and quantitative easing yes move from “ open - ended ” to “ time - contingent ” to “ statecontingent ” threshold based guidance source : 1. imf ( 2013 ), “ unconventional monetary policies – recent experience and prospects ”, april 18. of england ( 2013 ), “ monetary policy trade - offs and forward guidance ”, august. bis central bankers ’ speeches 2. bank annex ii : a chronology of major