deepak mohanty : perspectives on banking in india speech by mr deepak mohanty, executive director of the reserve bank of india, at the 5th indian chamber of commerce ( icc ) banking summit, kolkata, 18 may 2013. * * * the assistance provided by rekha misra and pallavi chavan in preparation of the speech is acknowledged. i thank shri rajiv mundhra, president indian chamber of commerce ( icc ) and shri rajeev singh, director general icc for the opportunity to be a part of this distinguished panel. the icc is making an important contribution to the development of banking by bringing together the experience and expertise from the banking industry, corporate sector and financial regulators through its banking summits year after year. in this year ’ s summit too, i see a judicious mix of expertise from the relevant areas to deliberate on the indian banking. the decade of the 2000s was eventful for the indian economy. we saw acceleration in gdp growth : with india recording its highest average annual output growth of 8. 7 per cent during the period 2004 – 08. this was accompanied by a sharp increase in savings and investment. at the same time, we had to contend with the fallout of the global financial crisis, the adverse impact of which has been persisting. economic growth has slowed down over the last two years and inflation remained above the tolerable level, though there has been significant moderation in the first month of the current financial year, 2013 – 14. these developments have had an impact on banking. against this economic background, i examine the performance of the indian banking sector over the last 12 years as finance is inexorably linked with economic progress. i will then touch upon financial inclusion, with a particular reference to the eastern - region, as it is a major plank of the reserve bank ’ s current policy thrust. i will conclude with some thoughts on challenges for the banking sector in the way forward. finance and growth economic literature establishes a positive association between financial development and growth. in the 1960s and 1970s, the pioneering work by raymond goldsmith, mckinnon and shaw underlined the importance of financial liberalisation to step up savings and investments in an economy, and thereby economic growth. 1 more recent studies, carrying forward the earlier work have reinforced our understanding of the ways in which finance could exercise a positive influence on economic growth across time and across countries. 2 even the recent global financial crisis, the causes of which are complex as they are, does not

currency resources abroad through the issue of american depository receipts ( adrs ) or global depository receipts ( gdrs ) subject to certain conditions. two - way fungibility of adrs / gdrs was operationalised to bring about alignment in the prices of indian stocks in the domestic vis - a - vis international markets. non - resident deposits : there have been significant changes in the policy framework for non - resident indian ( nri ) deposits held by the indian banking system, which constitute a major portion of external debt for india. the interest rate on the deposits were rationalized and linked to international benchmark libor. liberalised remittance of usd 25, 000 p. a. by resident individual : in order to provide hassle free remittance facility based on a declaration resident individuals were allowed in early 2004 to remit up to usd 25, 000 per annum for any permitted purpose both under current and capital account or combination of both. resident individuals were also permitted to acquire property overseas and open accounts with banks outside india. students : indian students studying abroad are treated as non - resident indians. as non - residents, they are eligible for all the facilities available to nris, in addition to remittance facilities presently available to students as residents. procedural simplifications no liberalisation effort is complete unless the customers or the end - users of the forex market can access the same through simple and transparent procedures. a number of initiatives have been taken towards procedural simplification with an objective of reducing the transaction cost. in the case of individuals, foreign exchange for current account transactions such as education, medical, travel, emigration, maintenance of close relatives abroad can be drawn from the authorised dealer based on simple declaration up to certain indicated limits. having regard to the liberalised approach in trade matters, specific steps were taken to allow exporters greater flexibility and freedom in the matter of seeking regulatory compliances. the system of self write off and self extension of due date for export realisation for exporters was introduced followed by raising the threshold limit for gr declaration. similarly, the simplifications of procedures for import remittances have also been introduced. overall, measures for simplification of procedures have been made subject to kyc and anti money laundering guidelines. in keeping with its commitment to ensure hassle - free service to the customers the reserve bank has constituted the committee on procedures and performance audit on public services ( cppaps ) ( chairman : shri s. s