could be a successful mode of credit delivery. hence, there is a need for promotion of self - help groups ( shgs ) with greater linkage with banks. in this regard, nabard has an important role to play, not only in promotion of shgs, but also in capacity bis central bankers ’ speeches building, along with sidbi and concerned state government agencies. another area where there is substantial scope for expansion is low - cost housing. expansion of housing loan remains poor as mortgages cannot be created in many parts of nes. however, banks can explore innovative structures for housing loans with a greater emphasis on group lending. seventh, in any plan for financial sector development, the physical presence of a bank branch is important. but the topography of the region, the dispersal of population, transport bottlenecks and law and order conditions in some areas inhibit branch expansion other than in certain commercial centres. hence, all the stake - holders – banks, state governments and the reserve bank – need to work in close co - ordination for increasing banking penetration and promoting financial inclusion in the region. conclusion to conclude, the north - eastern region has immense potential. the need, therefore, is to identify the opportunities and recognise the challenges to work towards a sustainable and inclusive growth of the region with greater penetration of the formal financial sector. bis central bankers ’ speeches

. state finances witnessed considerable deterioration in 2009 – 10 as is evident from key deficit indicators. even though there was a moderate impact on states ’ own tax revenue and tax devolution from the centre ( as ratio to gsdp ) due to overall macroeconomic slowdown observed in the indian economy in 2009 – 10, revenue expenditure increased due to higher administrative expenditures arising out of revised pay structure. however, capital outlays also increased with a greater focus on transport, water supply and sanitation, irrigation and flood control, education, sports, art and culture. the fiscal consolidation process, however, bis central bankers ’ speeches was resumed by nes in their 2010 – 11 budgets. it is important for nes to improve the quality of their expenditure with greater emphasis on capital expenditure for sustaining the fiscal consolidation process. there is also a need for nes to improve their own tax revenue. financial indicators the formal financial system in india is dominated by banks. nes, however, lag behind other parts of india in terms of development of banking. this is evident from the low banking penetration ( higher average population per branch ) in nes as compared with the all - india average, though there were significant variations across states in the region with mizoram and meghalaya having much better ratios. the credit - deposit ( c - d ) ratio in nes is much lower at 34 per cent at the end of march 2010 than that of 73 per cent at the all - india level ( table 6 ). even as credit expanded at a faster pace than deposits in the last decade, the gap remained very wide. the credit penetration, as measured by the ratio of bank credit to the nsdp, in nes also remained significantly lower than the all - india level ( chart 1 ). this raises the question as to whether low credit penetration in nes was due to lack of absorptive capacity in the region. however, this does not seem to be the case as non - formal sources of finance in the region dominate the financing activity in the rural sector. as per the 59th round of national sample survey ( nss ) data on indebtedness of farmer household in nes, 45 per cent of the finance availed of by the farmers was from the formal financial sector, while the remaining 55 per cent was from the non - formal sector. this was significantly higher than the all - india level with the share of the informal sector at 42 per cent ( chart 2 ). this shows that there is absorptive capacity and that